Bankers' salary mark-up gets smaller

The gap between bankers' salaries and everybody else's is narrowing, according to new research. They're still fat cats, but they're losing weight....

by Michael Northcott
Last Updated: 19 Aug 2013

It will come as no surprise that bankers are still getting paid more than other professionals (by some margin), but for the first time in about 30 years, the gap between bankers’ salaries and doctors, for example, is getting smaller.

The average investment banker earns about £212,000, which is about 5.8 times the average in the private sector, down from 9.5x back in 2006. That is the first major fall for almost a generation.

The revelation comes from research done by PwC, which measured pay packets in nine European and US investment banks.

Tom Gosling, from PwC’s rewards practice told the FT: ‘Bank pay has fallen further and faster than many people think, and 2012 has seen a material reallocation of returns from employees to shareholders’.

It’s worth noting that the adjustments are not small ones that you would expect from normal cycles in the financial industry. The report found that average profits at investment banks increased by about 28% in 2012, but pay fell by 6%. That is a big gap and shows that shareholders are potentially getting a better deal.

Whether or not these bumper pay deals will keep falling is anybody’s guess, but when the economic upturn comes and the public mood against bankers softens, you can bet the bonuses will roll back in…

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