Time to break out the tiny violins! Sure, $1.6 million for the year is a lot of money—hell, $160,000 is a lot of money—but Wall Street Journal's Dennis Berman reveals that one financial firm "paymaster" (the guy who sets salaries and compensation at a firm) says of the amount given to a mid-career investment banker, "It's not a lot of money." Damn all those other investment banks for screwing over the economy and sending us spiraling into the financial crisis because only taking in $380,000 in after-tax money SUCKS!
Berman gets the scoop on the math:
The paymaster noted that median precrisis pay was about $2.2 million a year. On average, some $200,000 came in base pay, with the remaining $2 million coming in an annual bonus, about 60% of which was paid in cash.
That is roughly $1.4 million before taxes, leaving after-tax take-home cash of about $700,000 a year, he calculated. That is slightly less than at the banker-pay peak of the early 2000s.
Today, the paymaster said, median banker pay is about $1.6 million. Base cash pay is higher, at about $400,000. But now, the bonus portion has been flipped. About 60% to 70% comes in the form of deferred compensation, largely in company stock.
That means there isn't nearly as much cash coming in during the first year of the pay package. Roughly speaking, that comes to about $380,000 in after-tax cash. A princely sum by most standards, but quite a comedown for anyone conditioned to take home nearly double that.
What also stinks? These i-bankers can't "retire rich in their 40s or early 50s.... Now, with so much of his or her compensation at risk, the prospect of the banker toiling deep into his 50s or even his 60s is very real." Maybe they should watch Inside Job to realize why their pay is lower.
