Banks are in the process of laying off both the bottom performers and their most expensive employees right now as fears of a recession loom and the Euro crisis remains unresolved and exposes Euro banks to losses. Traders therefore crush the share price of financials, exacerbating the need for cost-cutting.
The easiest targets for layoffs are high level (and high cost) personnel. And as they are forced to leave their offices, younger workers are taking their places. (UPDATE: Younger workers are also getting hired more. Word is Deutsche Bank hired 80% of their summer analyst interns this year. Typical numbers are more like 30-50%.)
The young are more appealing for a number of reasons: they’re cheap, they’re eager, and they’re willing to work longer hours because fewer of them have families. Translation: corner office!
Of course there are negative side effects of the older, wiser generation getting laid off, including, obviously, that morale is low. An article in Reuters says:
Employee morale often plummets at a time when survivors are asked to pick up more responsibility and customer relations can suffer as service and relationships deteriorate…Hours have become longer, trading floors have more open seats and fresh young faces are taking over offices where high-level personnel once sat. The highest-paid people can be easy targets for layoffs now.
Another negative of the shuffle is that the younger generation doesn’t have the same experience. And that people are pointing to financial reform legislation as one culprit of the layoffs. In particular, a reform law that required that bank employees receive more of their pay in the form of salary instead of bonuses is getting some flack.
That’s because now, because salaries are fixed, banks are stuck paying the high salaries. In previous years, banker pay would suffer along with bonuses, which are tied to returns, but this year it has less.