Wall Street Bonuses Fell 26% Last Year... Largest Cut Since 2008

Last year, the average bonus for employees on Wall Street in New York, USA, plummeted by a staggering 26%. This was due to the Federal Reserve's (Fed) aggressive interest rate hikes and the economic uncertainty caused by Russia's invasion of Ukraine, which froze the financial markets. This decline is the largest since the 2008 global financial crisis, which was directly hit by the Lehman Brothers collapse.

[Image source=Reuters Yonhap News]

The New York State Comptroller's Office announced on the 30th (local time) in its annual report that the average bonus payment for securities workers in New York last year was $176,700 (approximately 230 million KRW). This amount is 26% lower than the record high of $240,400 in 2021. The scale of the decline is also the largest since the 43% drop in 2008. Thomas DiNapoli, New York State Comptroller, explained, "This is the aftermath of a sharp decline in Wall Street profits due to fears of rising interest rates and recession," adding, "Bonus amounts have returned to pre-pandemic levels."

The reduction in Wall Street employees' bonuses was already a predicted outcome. Early last year, New York State and New York City anticipated a double-digit decline in annual bonus payments for securities workers on Wall Street due to soaring inflation and the Ukraine war. However, the actual decline far exceeded the initially expected 16%.

This is attributed to the severe impact on the sluggish mergers and acquisitions (M&A) and initial public offering (IPO) markets. Last year, 71 companies succeeded in IPOs in the U.S. public offering market, raising only $7.7 billion. This represents a roughly 95% plunge compared to the previous year ($142 billion), when the stock market was booming and trading was active. The New York Stock Exchange also recorded a double-digit drop throughout the year. The Nasdaq index, focused on technology stocks, fell by as much as 33%. As a result, trading fees for Wall Street investment banks are estimated to have been halved.

The New York Times (NYT) reported, "All types of financial activities have contracted," and added, "With recent fears about bank soundness triggered by the Silicon Valley Bank (SVB) crisis, 2023 could be an even more challenging year for high-earning financial sector workers." Recently, Wall Street firms such as Morgan Stanley and Goldman Sachs have announced layoffs involving thousands of employees, with restructuring continuing. However, CNN pointed out that these bonus amounts still exceed twice the average annual household income in the U.S.

It is estimated that Wall Street contributed 16% of the taxes collected in New York last year. The employment size is about 190,800 people. The state comptroller stated that one out of every eleven jobs in New York State is related to the securities industry. Due to the decline in Wall Street profits, income tax revenue forecasts for New York State and New York City were reduced by $457 million and $208 million, respectively. Comptroller DiNapoli said, "This could impact the New York economy," but added, "Our economic recovery does not rely solely on Wall Street."