Over the weekend on Wall Street Memo, one of the other writers relayed the fact that Goldman Sachs will reportedly pay out an average comp of $544,000 per worker this year (including salary and bonuses).Similarly, JPMorgan Chase will pay its investment bank workers, on average, $425,000 in comp this year.
These numbers sound big (work at Goldman for two years and become a guaranteed millionaire!), but some might not realise that an “average” is, well, an average — it is not a median.
Averages can be rather misleading; if you were to publish the average income of Harvard University drop-outs, it would be outrageously high, since you would be factoring in Bill Gates and Mark Zuckerberg. This does not mean, however, that all drop-outs from Harvard are hideously successful.
Yet, of course the media prefers to cite averages when it comes to the scary i-bankers, because it helps keep the Tea Party kettle boiling and the populist rage flowing through our veins.
A source with knowledge of Wall Street executive compensation agreed with me, “Yes, it’s misleading, first year associates out of business school will make around $220,000 to $250,000.”
Second year workers will earn closer to $300,000 to $350,000.
There is generally a top-heavy skew where managing directors and investment banking VPs will take home several multiples above that, but to think that everyone on the floor at Goldman or JPM is bringing in over a half million per year is not accurate.
Lloyd Blankfein and Jamie Dimon aren’t letting anyone starve, to be sure, but $220,000 pre-tax in Manhattan is a far cry from instant millionairedom.