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Average Wall Street Paycheck at $300,000 October 18, 2006

It was reported on Cnn.com yesterday that the average Wall Street paycheck is nearly $300,000. If that’s the average paycheck, there must be a wide range of pay between admin staff and associates/vp/MD. Depending on what your function is, admin staff may get anywhere between $60,000 and 90,000 plus bonus. But the first year associates may get $80,000 plus 100% bonus. This is one example of how the rick get richer.

Wall Street workers took home nearly $300,000 on average last year as profits from trading and merger advising fueled record earnings, New York State Comptroller Alan Hevesi said.

Wall Street compensation averaged $289,664 per person, 5.1 times the average $56,634 for workers citywide, the comptroller said in a study released Tuesday. The highest-paid bankers and traders can command eight-figure pay packages.

Bonuses totaled a record $21.5 billion, or $125,500 per person. The securities industry paid out $48.8 billion, while generating $2.1 billion of taxes for the city, Hevesi said.

Source:
Wall Street average paycheck near $300,000, CNN.com

US College Ranking and NYC-sized Income August 16, 2006

Each year, various publications rank the universities in the US. High schoolers and college students use these rankings to decide on where to go or how far up the ladder their current school stands in relation to other schools. The only value for these rankings for post graduates, like myself, is purely for the resume and to say that you went to a top 10 school or a ‘top tier’ school.

Many students for graduate education focus on jobs and potential income for selection to universities, but in this day and age, a bachelor’s degree is the baseline for a ‘decent’ career. An article in today’s NY Times states:

Today the United States ranks ninth among industrialized nations in higher-education attainment, in large measure because only 53 percent of students who enter college emerge with a bachelor’s degree, according to census data. And those who don’t finish pay an enormous price. For every $1 earned by a college graduate, someone leaving before obtaining a four-year degree earns only 67 cents.

I found the last sentence interesting. I guess being a professional in NYC attracts other professionals and college educated people, so I don’t normally think about people’s educational background. I assume everyone went to college. I went to a top 10 university (according to recent rankings in US News & World Report), but I rarely think that I am smarter than anyone else. In fact, there are so many smart people around me that I feel that I’m normal in terms of educational background. And I certainly don’t make close to Investment Banking or Attorney dollars.

In fact, in the very same day, the NY Times featured an article titled “New York Area Is a Magnet For Graduates“. According to the article, in 2005, in Manhattan, more than 57 percent of all residents had at least a bachelor’s degree, up from 50 percent in 2000. Of course this brings up the issue of lack of affordable housing, lack of people who are willing to work hard labor jobs, and the decline of artistic or creative types in NYC. Considering that average apartment is over $1.2 million, that brings up my previous question, how do these people have so much money? If I didn’t budget my money and wasn’t aware of all the personal finance topics that the PF community brings to me, I would not be able to live anywhere near NYC. The income gap between the rich and poor makes me nervous that NYC will not be affordable for anyone but the top 1% of earners in the US.

Sources:

IT Workers, What Do You Make? July 18, 2006

Are you in IT? How much do you get paid? This is the question, someone asked on The Joel on Software Group. The thread got Digged as well. It’s an interesting peek into IT salaries. People have submitted their anonymous salaries (some post fake salaries), and in general, people who have been in the industry for approximately 10 years can make $100,000 per year.

base salaries for Sr Developers in NYC range from 90k - 120 k. In the financial industry, you’re looking at a 20% bonus at least.

What I found amazing was the difference in pay among those who worked for a big company, and those who did their own thing.

There’s a range of job descriptions, from a software architect at Google to developers in India:

Experience: 4 years
Education: BS Computer Engineering
Certifications: No
Company: Google
Title: Software Architect
Location: MountainView, CA
SALARY: $165,000 + 20K Stock option @ $85.00 [That’s $1.7mil!]

Experience: 6 & 1/2 years
Education: some college
Certifications: none
Company: Large well known public company
Title: Team Lead
Location: Bangalore, India
SALARY: $17,000 a year

The danger of posting all these is that this is not a scientific poll, it is probably not very accurate, and entry level staff feel like they are not getting paid enough. There’s more to a job than salary. Living expenses in your area, benefits, flexibility, and education have to be accounted for. Are you surprised by IT pay?

Education Gap May Lead to Income Gap for the US June 28, 2006


A lot has been written up about the American education system failing our kids, while Europe and Asia’s education system is churning out many more Ph.D.s and M.D.s than the US education system. (Google some news stories on the US Education System). But what about the economic consequences of our failing schools? On a personal income level, workers with a high-school diploma earn on average $18,734 a year, according to the Census Bureau, while high school graduates earn $28,000 a year. The average worker with a bachelor’s degree earns three times as much as a high-school dropout.
On a macro level, if there’s a widespread difference between the US students and the rest of the world, the lack of qualified workers will slow our economy. What’s the difference between US and Chinese students? NY Times’ Nicholas Kristof writes in his column from yesterday:

…In math, science and foreign languages, the Chinese students were far ahead.

My daughter was mortified when I showed a group of Shanghai teachers some of the homework she had brought along. Their verdict: first-grade level at a Shanghai school.

…One reason Chinese students learn more math and science than Americans is that they work harder at it. They spend twice as many hours studying, in school and out, as Americans.

Chinese students, for example, must do several hours of homework each day during their summer vacation, which lasts just two months. In contrast, American students have to spend each September relearning what they forgot over the summer.

…only 13 percent of American high school pupils study calculus, and fewer than 18 percent take advanced biology.

Yet if the Chinese government takes math and science seriously, children and parents do so even more. At Cao Guangbiao elementary school in Shanghai, I asked a third-grade girl, Li Shuyan, her daily schedule. She gets up at 6:30 a.m. and spends the rest of the day studying or practicing her two musical instruments.

So if she gets her work done and has time in the evening, does she watch TV or hang out with friends? “No,” she said, “then I review my work and do extra exercises.”

A classmate, Jiang Xiuyuan, said that during summer vacation, his father allows him to watch television each evening — for 10 minutes.

The Chinese students get even more driven in high school, as they prepare for the national college entrance exams. Yang Luyi, a tenth grader at the first-rate Shanghai High School, said that even on weekends he avoided going to movies. “Going to the cinema is time-consuming,” he noted, “so when all the other students are working so diligently, how can you do something so irrelevant?”

…Now, I don’t want such a pressured childhood for my children. But if Chinese go overboard in one direction, we Americans go overboard in the other. U.S. children average 900 hours a year in class and 1,023 hours in front of a television.

You say it can’t happen? Bill Gates and Warren Buffett are worried enough to donate $60billion of their money into the Bill and Melinda Gates Foundation to focus on education and global health. If we don’t do anything to improve graduation rates and education in the US, our kids and grandkids’ incomes will drop.

Source:
Chinese Medicine for American Schools, NY Times (subscription required)
By Nicholas D. Kristof
Published: June 27, 2006

Income Gap Between CEOs and Workers June 1, 2006

Capital One Financial Chairman and CEO Richard Fairbank earned $280 million last year. The average American household brought in $54,453 in 2004, according to the Bureau of Labor Statistics.

The gap is even more shocking when you consider what people unfortunate enough to be at the bottom of the pay pyramid make. Americans earning the federal minimum wage of $5.15 an hour would have to work 26,100 years to make what Fairbank brought home last year.

The average pay for a chief executive was $11.3 million last year, an increase of 27% over the year before, according to a survey of 200 large companies by Pearl Meyer & Partners, the compensation division of Clark Consulting. That was 208 times the average household’s earnings in 2004. It’s a sad fact that the United States ranks No. 1 in the world in the size of the pay gap between executives and workers.

Source:
What a huge CEO salary would buy you
from MSN Money

Economic Classes in the USA April 25, 2006

Our family grew up in what I think is an upper class neighborhood. I had friends whose family had huge homes, nice cars (Ferrari, Porsche, Benz), and parents who owned businesses or were executives. Our family was comfortable, but we didn’t own the 6000 sq. ft. mansions, sports cars. In other words, I believed that we were upper middle class family in an upper class neighborhood. Our discussion about class in America prompted me to think about what class I am in. Although I knew that the lower class didn’t have much net worth or did not hold management-type jobs, I never thought about what made a family middle class vs upper class.

According to wikipedia, the US has no legally-recognized social classes. Elites exist, but are numerous and there is no universally recognized hierarchy of people. Generally, sociologists use a five class model:

  1. Upper class
  2. Middle class: Upper-middle classs
  3. Middle class: Middle-middle classs
  4. Middle class: Lower-middle classs
  5. Lower class
  Upper class Upper-middle classs Middle-middle classs Lower-middle classs Lower classs
Proportion 1% to 3% of the U.S. population 10% or so of the U.S. population 40% or so of the U.S. population 30% or so of the U.S. population 20% of the U.S. population
Net worth
(not including home)		 above $500,000 between $250,000 and $500,000 between $125,000 and $250,000 $50,000 to $125,000 $0 to $50,000

There’s a lot of fuzzy borders between the classes, and there are no clear cut answers, but this gives us some idea of the classes in America. It’s said that the wealth of the top 1% in the United States equals the wealth of the lower 95%. I belive that the spreading wealth gap is causing a smaller proportion of middle class in American society. The reason may be downsizing in some industries of the American economy, competition from lower-paid foreign workers and contractors, and the systematic elimination of unionized labor.

There’s also a lot of discussion on Oprah’s message boards about class in America where there’s some interesting perspectives. Do you ever think about what class you’re in? Do you worry about the widening income gap between classes?

Source:
Wikipedia - Social structure of the United States
http://federalreserve.gov/pubs/bulletin/2006/financesurvey.pdf

Women Shopping Habits and Class in America April 24, 2006

According to a Financial Times article today, lower-income women (with less than $45,000 annual household income) confined their weekly shopping to the mass merchandisers, super-centers, and dollar stores while high-income shoppers (with annual household income of more than $75,000) shopped in drug stores, department stores, specialty stores and warehouse clubs.

…women shoppers were “even more prudent and price conscious and even less willing to pay a premium for convenience” than two years ago. Their attitudes to shopping are all focused on saving money.

From what I’ve seen with friends and family, it seems that every family, regardless of economic class shops at discount warehouse stores (such as Sam’s Club or Costco) and are more conscious of prices. Perhaps the growing gap between low income and high income shoppers widening is a big reason that the lower, middle, and upper middle class are increasing in number.

Speaking of classes, The Oprah Show had an episode about class in America. Jamie Johnson, an heir to the Johnson & Johnson Pharmaceutical company, shares with Oprah some interesting and depressing facts about the rich and poor gap:

Do you think this lopsided wealth, concentrated on the top 1% of Americans is related to the topic of shopping habits above?

Source:
Shopping Habits Shift as Women Watch Their Wallets
by Lauren Foster of Financial Times

Would You Take GM’s Buyout Package? March 29, 2006

Last week, more than 120,000 hourly workers for General Motors and auto supplier Delphi were offered buyouts of up to $140,000. It’s tough to see such a large company having to cut so many workers.

If you took that offer, you’d have to give up retirement and health benefits. Given the choice, would you take a large payment and no benefits, or a smaller payment and continued health care coverage? $140,000 is no small sum, but it’s not an amount you can live off of, unless you are close to retirement. If you face such a choice, don’t underestimate the value of benefits because those costs will only go up over time. Consider tax implications too. If your buyout is considered severance pay, as opposed to a lump-sum pension payment, it will be taxed as ordinary income. That could push you into the next tax bracket, and the employer must withhold more tax, thus making the payout smaller than the stated number.

If you’re young, you have time on your side. If you’re able to put all the $140,000 in an interest bearing account such as ING Direct for 5 years with an interest rate of 4% compounded monthly, you’d end up with $170,939.52. That’s $6000 per year of income if you were able to get another job that pays for your living expenses. The problem with many of the GM workers is that getting another job is probably not that easy, since the US auto industry is not exactly booming. At my age (30s), I’d take it since I wouldn’t know if GM would cut me later without the buyout package.

So, would you take the buyout?

Craigslist Money Forum…useful or not? February 15, 2006

Occasionally, I look on Craigslist’s money forum to look at trends in the topics of discussion. I’ve noticed that there are lots of questions about how to save more money. It seems like a lot of people are struggling with debt payments and increases in living costs, so saving more is not an option for some people. CL is a good place to start, but sometimes you get some BS posts, but that’s anywhere on the net.

A couple of threads about budgeting and managing loans:

Do you think CL is useful for money information?

Falling Wages, Rising Apartment Rentals in NYC February 13, 2006

Since writing about expensive rental apartments in New York City, a new survey was released by city housing officials in NY State. A NY Times article says that while rents have gone up 8.7% from 2002 to 2005, median household income for rental households have gone down 5.6%. This is no surprise given that housing prices have increased so sharply in the past 5 years. The gap between the haves and have-nots is growing. Will rental prices ever go down?

Source:
Affordable Apartments a New York Luxury, 2/11/2006
by Alan Feuer, New York Times

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