With new financial regulations currently being debated in the Senate, the likelihood of an increase in banking sector constraints is high.
According to a paper written by academics Thomas Philippon and Ariell Reshef, as regulation of the financial sector has declined, pay for financial sector workers has increased.
Financial deregulation is judged to be the removing of bank branching rules, the end of Glass-Steagall, the removal of interest rate ceilings, and the end of the separation of banks and insurance companies.
If those separations return, financial workers are likely to see their pay decline as a result.
Chart taken from Simon Johnson’s presentation to the Institute for New Economic Thinking:
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