Wall Street Banks Lift Pay for Junior Bankers By Sara Jerving and Justin Baer August 20, 2014 10:19 PM http://on.wsj.com/1trm6IT Wall Street banks, under pressure to improve working conditions for junior employees, are raising salaries. A host of big banks including Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Citigroup Inc., Bank of America Corp. and Morgan Stanley have decided to raise pay or are seriously considering the move for many junior bankers. The pay hikes, which are generally coming in the form of salaries as opposed to year-end bonuses, could hit 20%-25% at some firms. Goldman Sachs will increase starting salaries for many first-year analysts by about 20%, according to a person familiar with the bank’s plans. The pay raise, slated to go into effect next year, will apply only to analysts in the U.S., the person added. The move comes as Wall Street continues to bounce back from a financial crisis that put it in the crosshairs for the lavish bonuses. Politicians and regulators argued the industry’s pay policies pushed employees from the CEO on down to take risks that left the financial markets on the brink of collapse. Big banks responded by moving to lower yearend cash bonuses, while paying a bigger slice in company stock and boosting salaries, viewed as a more stabilizing means of pay. For the junior employees, Goldman Sachs made the decision in order to remain competitive among graduating college seniors, who will likely be faced with other offers in finance, according to a person familiar with the decision. Junior analysts will now make about $85,000, not including bonuses, up from about $70,000, the person said. In recent years, Wall Street firms have faced pressure to pay their junior employees more, while cutting back on their hours, as recruiting has suffered from the reputational damage of the financial crisis, the long hours of working at an investment bank and a challenging revenue environment for the industry. Last year, discussions about working conditions on Wall Street came to the fore after a 21-year-old Bank of America Merrill Lynch intern in London died of an epileptic seizure that an inquest found could possibly have been brought on by the long hours he was working. Goldman’s pay raise, which will likely include first-year and second-year analysts, comes along with other efforts to improve incentives for junior bankers. Last fall, Goldman added a protected weekend for investment-banking analysts in which they aren’t allowed to work from Friday evening to Sunday morning. Bank of America is boosting the pay of its junior investment-banking and trading employees by at least 20% next year, a person familiar with the matter said. The bank included the higher salaries in the offers it made this month to summer interns who were invited to return as full-time employees in 2015, the person said. J.P. Morgan may raise some employee salaries by at least 20 percent as well, a person familiar with the matter said Wednesday. Internal discussions are continuing on the subject, though a pay raise for some is likely since rivals have raised pay to try to make their offers more attractive. Citigroup is also considering a pay increase for analysts and associates, a person familiar with the bank said. Last month, Morgan Stanley told junior bankers and junior workers on its capital-markets desks it will raise their base salaries by as much as 25%. The Morgan Stanley move, which affects associates and vice presidents in the bank’s global markets and investment-banking divisions, won’t affect bonuses, which are determined separately around year-end and could fall even as salaries move higher, said a person familiar with the matter. Write to Justin Baer at justin.baer@wsj.com
$85,000 in NYC is terrible. That’s only the equivalent of $34,470 in my city according to the cost of living calculator
For a new college graduate, $85k would seem like all the money in the world. One can live modestly in NYC on $30k/yr. (I’ve done it).
- 100% bonus
So are you saying that the cost of living calculator is incorrect?
It’s correct if you’re comparing the cost of life in a 2300 sqft home in Manhattan vs a 2300 sqft home in Oaklahoma City. For a 22-year-old college graduate however, the cost of living calculator is very misleading.
Now I’m curious where you live. and what COL calculator you’re using. $85k salary is perfectly doable. Remember this excludes a likely big bonus.
Im using the CNN one. first google result for “cost of living calculator”
I live in texas
22-year-olds spend $800/month on rent no matter where in America they live. The only difference is what $800 gets them in the place where they’re living.
Id say that’s quite a bit of a generalization. I am 23 so I know many 22 and 23 year olds. Some have purchased 3 bedroom homes, some have fancy apartments downtown for $1900 one bedroom, some have mid-tier 2 bedroom places for about $1200, and others live in cheap, low quality one bedroom places for $550 a month. Theres a wide array of places people live at 22. It isnt that clear-cut.
Of course there is variation. My point is that a 22-year-old that pays $750 for a 1-bedroom apartment in Oklahoma City, is unlikely to choose to live in an equivalent-sized apartment if they moved to NYC, as it would cost them $3000/mo there. More likely, they would downsize their housing aspirations to something sub $2000/mo, maybe even $1000/mo. A 22-year-old in NYC also would not own a car, while a 22-year-old in Oklahoma City would probably spend $7000 a year on a vehicle. Cost of living calculators ignore this real-world behavior.
fair
So you lose the car and live in a shoebox but its all the same?
At the end of the day, it’s all about tradeoffs. Van, I live in Texas too so I’m used to cheap COL.
My old 1 bedroom apt was $700 a month + utils for a 700 sq ft place. In NYC, I have friends that live in from $1600/mo studios to paying 1000/mo for a shared 3 bedroom. If I were to move to NYC, I'd stick to the amt, not to space, just as Wendy suggests. Also I own my car free and clear, so my only expenses are gas and insurance. That’s a little bit more than an unlimited metrocard, which runs ~$120/mo in NYC.
Thing is, we don’t need that much space, we grow to fit the space we rent/buy. I was perfectly happy in 700 sq ft. I now live in 2000 sq ft because I have bought a house, but I could live in that small of a place again. In NYC, you have whatever you want, a subway or bus away. Here, you have to drive there, back, be sober, etc. It’s a different lifestyle.
Still, the point is, having to live in a smaller place isnt the same thing. If smaller was truly not a worse constraint, you would not choose to live in a larger home in Texas. Clearly, bigger and nicer is better. It’s pretty ridiculous to say otherwise
The cost of living calculator suggests that a person earning $35k and living in the midwest is equally as well-off as a person earning $85k and living in Manhattan. That’s true if you considering only how much “stuff” you can possess. If I was given the choice between $85k in NYC and $35k in the midwest, I would take $85K in NYC, no question. Heck, I’d take $85k in NYC over $85k in the Midwest too. Having “stuff” is over-rated.
And living in Texas vs Manhattan isn’t the same thing either. Most twentysomething americans would jump at the chance to live in Manhattan. And many wouldn’t move to Texas (excluding perhaps Austin) for any amount of money. The point is that the cost of living calculator picks up on all of NYC’s financial disadvantages (primarily 4x smaller homes per $), but none of its many lifestyle advantages.
It’s not just “stuff”. It’s food, drinks, groceries, utilities. All things necessary for a reasonable life. It sounds to me like you are just an unabashed, biased, manhattan lover
I kinda disagree. I didn’t set out wanting a 2000 sq/ft house. I was happy in my 700 ft apt. I was also happy renting a 240 ft room in my friends big house (though his fiance took issue with me living upstairs, hence moving out). Unfortunately, it’s quite difficult to find a sub <1250 ft place that doesn’t come with insane HOA/common area fees. So the choice was pay $70/ft for my house, or pay more like $120/ft for a 1 BR townhouse that came with insane HOA fees. I picked the house, despite the fact that I essentially live in 3 rooms: my bedroom, the family room (that has my 50" TV), and my office (which has my dual monitor desktop). I really don’t use the other 2 bedrooms or 2 bathrooms. So I’d really say bigger isn’t necessarily better. I just chose the bigger house because it made more financial sense when buying. If I were renting and paying the same amount per ft, I’d take the smaller place any day of the week. If you’re renting, which in NYC you would, your original argument doesn’t hold much water.
For full disclosure, as much as I love my good income/low COL life in Texas, if you gave me a job in NYC that paid the same COL and tax adjusted salary I’d take it in a heartbeat. The city has a beat that just isn’t replicated anywhere else I’ve lived. Stuff is just stuff. Also its a complete PITA when you eventually move.
That’s totally irrelevant. That’s someone’s personal choice. You can make the argument about which is a preferable place to live. That’s a totally seperate issue. This is a discussion about the realities of cost of living.
On a side note, Texas has many more people move to it each day than New York does, and has the highest percentage of residents that are pleased with where they live. So i dont think your statement is true, anyway. I dont think all the 25 year olds are chomping at the bit to stand next to stinky people on the subway, pay $15 for a beer, and live in a 400 square foot apartment