EDITOR'S NOTE: I rarely give up my blog space to posting an article without extensive commentary but I'll let my headline above speak for itself except for one rhetorical question below:
Wall Street Bonuses and the Minimum Wage
The New York financial industry's bonus pool exceeded the annual earnings of the more than 1 million Americans who work full-time at the federal minimum wage.
Wall Street banks handed out $26.7 billion in bonuses to their 165,200 employees last year. That amount would be enough to more than double the pay for all 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.
Purveyors of luxury goods always welcome the Wall Street bonus season, but a raise in the minimum wage would give America’s economy a much greater boost. To meet basic needs, low-wage workers tend to spend nearly every dollar they make. The wealthy can afford to squirrel away more of their earnings.
All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.
These pennies add up considerably on $26.7 billion in earnings. If the $26.7 billion Wall Streeters pulled in on bonuses in 2013 had gone to minimum wage workers instead, our GDP would have grown by about $32.3 billion, over triple the $10.4 billion boost expected from the Wall Street bonuses.
This immense GDP differential only speaks to one price we pay for our contemporary Wall Street bonus reward culture. Huge bonuses, we learned from the 2008 financial industry meltdown, create an incentive for high-risk behaviors that endanger the entire economy. And regulators have failed to implement a provision in the 2010 Dodd-Frank financial reform legislation to prohibit financial industry pay packages that encourage “inappropriate risks.”
RAD: Why has the Obama administration failed to implement the Dodd-Frank reforms to stop these obscene bonuses?
Low-wage jobs, on the other hand, endanger nothing. Concentrated in agriculture, hospitality, and retail, these jobs provide real services. They deserve much higher minimal rewards.
For sources & methodology see "comments"