The Great Divergence: Real-Wage Growth of All Workers Versus Finance Workers

Source: Andrew Sum and Paulo Tobar with Joseph McLaughlin and Sheila Palma
Challenge, May-June 2008

In case you wondered whether workers in securities firms and investment bankers have fared better than the rest of American workers, the answer is, resoundingly, “Yes.” Andrew Sum and his colleagues here present the most comprehensive evidence so far. It is eye-opening.

Typical full-time wage and salary workers in the United States achieved no increase in their weekly earnings over the 2002-2007 period. They gained no economic ground despite rising labor productivity and increasing aggregate employment opportunities over most of this five-year period. Second, the mean weekly earnings of the nation’s production or nonsupervisory workers rose by only $6 over this five-year period, barely enough to buy a premium six-pack of beer in most states or a grande latte and a scone at Starbucks.

The mean weekly earnings of workers in the nation’s investment banking and securities industries rose by $2,408 between the first quarters of 2002 and 2007, four hundred times higher than the mean weekly earnings gains of the nation’s 110 million frontline workers. The mean weekly earnings (including bonuses) of wage and salary workers in the investment banking and securities industries of Manhattan rose by $8,028 over the 2002 I-2007 I period. This mean weekly wage gain for Wall Street workers was 134 times higher than the mean weekly wage gain for all U.S. wage and salary workers, including executives, and 1,338 times higher than the mean weekly wage gain for all frontline workers in U.S. industries over this five-year period.

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