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Nov. 14, 2017, 12:15 a.m. EST

Wall Street bonuses jump 10% under Trump, but employee wages are stagnant

Most Americans are still waiting on a bigger salary

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By Kari Paul, MarketWatch


Reuters
A strong stock market and a favorable political and regulatory environment are contributing to one of Wall Street’s healthiest years, a new study found.

Wall Street bankers are cashing in this year.

Bonuses in the financial industry are set to jump 10% this year , with bankers who advise on issuing stocks and bonds predicted to see a pay jump of as much as 20%. This marks the first meaningful jump since 2013, according to an analysis released Sunday by compensation firm Johnsons Associates Inc, and is owed largely to reduced emphasis to financial regulation under President Donald Trump and rise in stocks of these firms, the company said.

The largest increases (15% to 20% or more) are projected for investment banking underwriting professionals followed by private equities professionals, followed by private equity (10% to 15%), asset management (5% to 10%).

“A strong stock market and a favorable political and regulatory environment are contributing to one of Wall Street’s healthiest years,” Alan Johnson, managing director of Johnson Associates, said in a statement. “As a result, incentives will be up noticeably, especially in asset management and investment banking.”

‘A strong stock market and a favorable political and regulatory environment are contributing to one of Wall Street’s healthiest years recently.’

Alan Johnson, managing director of Johnson Associates

Rich executives got even richer in 2016, as pay increases remained frozen for the average employee. Pay raises are not expected to increase in 2018, either, with base pay expected to rise 3%, up just slightly from 2.9% in 2017, according to a separate survey by advisory firm Willis Towers Watson. Chief executive salaries increased by 6% in 2016 — higher than the 4% increase in 2015 and the highest increase since 2013.

Wages for executives have been increasing at a relatively moderate rate in recent years — for CEOs, at least. The survey attributed the increase of CEO compensation to uneven corporate performance, increasing annual bonuses and a sharp decrease in the value of stock option exercises.

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As chief executives continued to get richer in 2016, the average employee saw only a 3% raise in their annual salary last year — the same they received the previous three years. That’s essentially stagnant wage growth, when inflation is taken into account . However, workers whose performance exceeded expectations continued to receive significantly larger raises, the survey found. Still, that may not soothe the frustration of employees who have waiting for bigger raises.

‘Most CEOs are not going to have to worry about saving for retirement or for the college educations of their children.’

–Mark Hamrick, Washington bureau chief at Bankrate.com

A separate study from industry research group Equilar confirmed the 6% raise, but that also highlighted a far more startling difference: the average CEO pay reached $16.6 million in 2016, Equilar found,compared to average annual salary of $49,630 for U.S. workers, according to the Bureau of Labor Statistics.

“Given the substantially higher pay most CEOs enjoy, it is worth a reminder that any raise ends up being huge in dollar terms,” Mark Hamrick, Washington bureau chief at personal finance website Bankrate.com said. “We’re reminded of the long-term challenges of income inequality in the U.S. and the hollowing out of the middle class. Most CEOs are not going to have to worry about saving for retirement or for the college educations of their children.”

In 2016, there were eight CEOs with pay packages exceeding $30 million. Meanwhile, America’s Middle class has been shrinking and lost 30% of its wealth over the last four decades, according to another 2015 study. “For many workers, seeing the large pay increases many CEOs are able to command, there’s further insult to financial injury because of the low rate of wage gains overall,” Hamrick said.

Kari Paul is a personal finance reporter based in New York. You can follow her on Twitter @kari_paul.

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