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Wednesday, 12 March 2014 08:15

Reduce Record Wall Street Bonuses and Double the Pay of Minimum Wage Workers Instead

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT

abankbonus(Photo: A. Golden)It was a banner year for Wall Street bonuses in 2013, a Reuters March 12th article reports:

Wall Street's average cash bonus swelled last year to its highest since the financial crisis and the third largest on record, New York State's budget watchdog said on Wednesday.

The cash bonus pool jumped 15 percent to $26.7 billion in 2013, pushing the average cash bonus was $164,530, according to the New York state comptroller's annual estimate based on personal income tax trends.

The increased bonuses came as Wall Street posted a fifth consecutive year of profits after record losses during the 2008 financial crisis. 

The uptick in bonuses reflects statistical evidence that 95 percent of revenue and asset gains in the economy since the bust of 2008 have gone to the top one percent. According to an Associated Press analysis:

The gulf between the richest one percent and the rest of America is the widest it's been since the Roaring '20s....

US income inequality has been growing for almost three decades. And it grew again last year, according to an analysis of Internal Revenue Service figures dating to 1913 by economists at the University of California, Berkeley, the Paris School of Economics and Oxford University....

But since the recession officially ended in June 2009, the top one percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top one percent.

That compares with a 45 percent share for the top one percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

The top one percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000.

The implications of more than 90 percent of the increased financial gain since 2008 going into the hands of so few has dramatic implications for undercutting overall economic expansion that would translate into jobs for the majority of Americans. 

The Institute for Policy Studies (IPS) explained it this way in an email announcing their own analysis of the Wall Street bonus data: 

IPS also calculated the differential between the economic stimulus effect of the Wall Street bonuses versus what might be expected with an equivalent increase in minimum wage worker earnings. If the $26.7 billion had gone into the pockets of minimum wage workers, the U.S. GDP would be expected to grow by about $32.3 billion, more than triple the $10.4 billion boost expected from the Wall Street bonuses.

While fast food workers are fighting for survival wages, IPS points out that they could have a livable income if the Wall Street bonuses were not so excessive:

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. 

IPS also points out the inherent risk of our economy crashing again because of lavish rewards for pushing through the envelope of financial regulation:

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.”

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. 

Once again, the billions of dollars in Wall Street bonuses remind us that our society values gambling with trillions of dollars over laboring for a living and contributing to job growth through increased populist purchasing power.

Copyright, Truthout. May not be reprinted without permission.