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The key comparison to make with this year’s Wall Street bonuses

FILE: Commuters near Wall Street. (Photo by Bonnie Jo Mount/The Washington Post)

New York State Comptroller Thomas DiNapoli released his annual analysis of Wall Street bonuses Wednesday, prompting many to put this year’s financial industry windfalls into some relative context.

The average bonus, which was $172,860 in 2014, is more than three times the median household income in the U.S., CNN reported. The New York Times wrote that this year’s average bonus was up “just” 2 percent, far lower than the 19 percent rise seen between 2012 and 2013.

And the Institute for Policy Studies, a left-leaning think tank, reported that the overall Wall Street bonus pool, which clocked in at a cool $28.5 billion, is double the combined annual earnings of full-time minimum wage workers in the U.S. The organization also said the total bonus pool is larger than the amount that would be needed to give the country’s restaurant servers, fast food workers and home health and personal care aides—some 6.6 million people in total—a raise to $15 an hour. 

But while all of those figures may offer telling perspectives on how big this year's bonus pool may be, the key comparison to make is the one that tells us something about how big the bonuses should be. And that’s a comparison to Wall Street’s profits. 

According to DiNapoli’s report, Wall Street, as an industry, earned $16 billion in 2014, only the ninth largest total profit haul for the industry in the 20 years since 1995. Yet both the average bonus and the total incentive pool in 2014 was the third highest for the industry over the same period. In 2006, Wall Street’s bankers shared a $34.3 billion pool in a year that saw $20.9 billion in profits, according to the comptroller's report; the following year, the bonus pool was $33 billion despite huge losses. (Hence, all those financial crisis-era pitchforks.)

It’s a rough comparison, of course. Other factors affect the bonuses paid out, such as growth in one area of the business while others falter. The need to attract great people in a competitive talent market has also long been used as a reason bonuses are high even in down years for the industry. 

But that argument is getting harder to make--even with some growth in jobs last year--as Wall Street has shrunk following the financial crisis. According to DiNapoli's report, the size of the industry's workforce is still 11 percent smaller than it was in 2007. Wall Street's leaders may still be grappling with the idea that the size of the industry--and its profits, though still high--have entered a new post-crisis reality. They need to recognize that the bonuses they pay out should too.

Read also:

Wall Street eases up, a little, on its junior bankers

Why slackers still get bonuses

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