The average bonus paid to securities industry employees in New York City grew by 15 percent to $164,530 in 2013, which is the largest average bonus since the 2008 financial crisis, and the third highest on record, according to an estimate released today by New York State Comptroller Thomas P. DiNapoli. The bonus estimate includes cash bonuses for the current year, supplemented by compensation deferred from prior years.
“Wall Street navigated through some rough patches last year and had a profitable year in 2013. Securities industry employees took home significantly higher bonuses on average,” DiNapoli said. “Although profits were lower than the prior year, the industry still had a good year in 2013 despite costly legal settlements and higher interest rates. Wall Street continues to demonstrate resilience as it evolves in a changing regulatory environment.”
After record losses during the financial crisis, the securities industry has been profitable for five consecutive years, including the three best years on record. The industry reported profits for the broker/dealer operations of the New York Stock Exchange member firms, the traditional measure of profitability for the securities industry, totaled $16.7 billion in 2013, which is 30 percent less than in 2012 ($23.9 billion) but still strong by historical standards.
The securities industry has undergone a major overhaul since the 2008 financial crisis. Regulatory reforms are changing the way the industry does business by requiring larger reserves, limiting proprietary trading and imposing other changes intended to reduce unnecessary risk and to enhance transparency. In response to compensation reforms, firms now pay a smaller share of bonuses in the current year and a larger share is deferred to future years.
Even though the securities industry has been very profitable in recent years, the number of industry jobs in New York City has not returned to the pre-crisis level. DiNapoli estimates the securities industry employed 165,200 workers in New York City in December 2013, which is 12.6 percent fewer workers than before the financial crisis. After large job losses during the recession, employment in the securities industry in New York City has stabilized.
DiNapoli’s office releases an annual estimate of cash bonuses paid to securities industry employees who work in New York City during the traditional bonus season. Bonuses paid by firms to their employees located outside of New York City (whether in domestic or international locations) are not included. The Comptroller’s estimate is based on personal income tax trends, which do not distinguish between cash bonuses for the current year and compensation deferred from prior years. The estimate does not include stock options or other forms of deferred compensation for which taxes have not been withheld.
DiNapoli also reported that:
- The bonus pool for securities employees who work in New York City also grew by 15 percent in 2013 to $26.7 billion during the traditional December-March bonus season. The Comptroller’s estimate includes cash bonuses for the current year, supplemented by bonuses deferred from prior years. Over the past two years, the bonus pool has grown by 44 percent, driven by compensation deferred from prior years;
- Although data are not yet available for 2013, the average salary (including bonuses) paid to securities industry employees in New York City ($360,700 in 2012) was 5.2 times greater than the rest of the private sector ($69,200 in 2012);
- Despite its relatively small size, the securities industry is still one of New York City’s major economic engines. The securities industry, for example, accounted for 22 percent of all private sector wages paid in New York City in 2012 even though it accounted for only 5 percent of the city’s private sector jobs;
- The securities industry generates a significant amount of tax revenue for New York state and New York City. DiNapoli estimates New York City collected $3.8 billion in taxes in fiscal year 2013 from activities directly attributed to the securities industry, nearly 27 percent more than in the prior year and the second-highest level on record. Although less than the prerecession peak (11 percent), the securities industry accounted for 8.5 percent of the city’s tax revenues;
- New York state, which depends more heavily on Wall Street revenues than the city does, collected $10.3 billion in taxes attributed to the securities industry during SFY 2012-13. Last year, the securities industry accounted for 16 percent of all state tax revenue, less than the prerecession peak (20 percent); and
- City tax revenues could be $100 million higher than anticipated in the city’s budget because it assumed a 5 percent decline in the bonus pool. The state budget assumes a 7.8 percent increase in bonuses for the entire financial sector. While there is the potential for some additional state tax revenue, the state outlook is more consistent with DiNapoli’s forecast.
Click here for a chart showing the cash bonus pool from 1985-2013.