The authors even quantified it. By their calculations, “30 to 50 percent of wage differentials” — the difference between an average worker’s income and that of a Wall Street financier — is the result of overpayment and “can be expected to disappear.” The study, “Wages and Human Capital in the U.S. Financial Industry: 1909-2006,” provides a striking history lesson that may prove to be a predictor of what Wall Street — and compensation — may look like over the next 30 years.
Before the Great Depression, the researchers found that the finance sector “was a high-skill, high-wage industry.” After the stock market crash, “a dramatic shift occurred,” the study said, as Wall Street’s “human capital” and “wage premium” started to decline. From 1950 to 1980, the trend continued, albeit at a “more moderate pace.”
“By that time, wages in the financial sector were similar, on average, to wages in the rest of the economy,” the study said.
Then something curious happened. After 1980, the finance sector returned to its roots, handing out large paychecks to highly skilled workers. By 2006, the authors found, “relative wages and relative education levels went back almost exactly to their pre-1930s levels.”Page 3 of 4 | Prev Page | Next Page