Wall Street bonuses for 2010 fell 8 percent on average from the previous year. Wall Street bonuses fell despite the fact that 2010 was the second-highest year ever for Wall Street profits. Overall compensation for Wall Street workers actually grew in 2010, with a greater percentage paid in base salaries rather than bonuses.
Wall Street bonus statistics
Wall Street bonuses in the financial services industry averaged $128,530 in 2010, according to New York State Comptroller Thomas DiNapoli. That figure represents an 8 percent drop from the $140,730 average for Wall Street bonuses the year before. Total Wall Street bonuses in 2010 were $20.8 billion, a 33 percent drop from 2006 before the financial crisis, when bonuses reached a record $34.3 billion. Despite the financial crisis, Wall Street profits added up to $27.6 billion in 2010, second only to 2009, when government bailouts and record low interest rates drove up profits to a record high $55 billion.
Wall Street bonus deception
The decline in Wall Street bonuses for 2010 is not a signal of executive compensation in decline. The smaller bonuses are a response by the financial services industry to public backlash that arose about executive compensation during the financial crisis. DiNapoli reported that compensation for the financial services industry on Wall Street grew 6 percent in 2010. Financial reform regulation, along with the controversial nature of obscene bonuses, has motivated big banks to change the way they pay employees. Now, more money is funneled to them through base salaries rather than bonuses.
A new tax avoidance tactic
Wall Street firms are also deferring compensation to give financial regulators the impression they are encouraging long-term profitability instead of short term gain. By doling out smaller bonuses, Wall Street firms have also discovered a new and effective tax avoidance tactic. According to DiNapoli, tax revenue from the financial sector made up about 20 percent of New York state tax revenues before the financial crisis. That number has fallen to 13 percent. New York City’s tax revenue from Wall Street declined from 13 percent before the crisis to 7 percent in 2010.