Wall Street’s bonus season is over and discretionary compensation wasn’t quite as sweet as it was the year before.
In 2023, Wall Street profits were up 1.8 percent to $26.6 billion but bonuses still shrunk slightly. The average bonus fell 2 percent to $176,500 from $180,000 the year before, according to an annual estimate by the New York State Comptroller’s office.
The Comptroller said the dip was a result of firms taking a more cautious approach to compensation and divvying up the bonuses across more employees. There were 198,500 people working in the securities industry in 2023, up from 191,600 in 2022. But the bonus pool was the same both years: $33.8 billion.
Bonus pools were significantly larger in recent years: $37.1 billion in 2020 and $42.7 billion in 2021, a record total that helped boost the average bonus paid to $240,300 that year.
Investment bankers and portfolio managers might be disappointed with their 2023 bonuses, but in dollar terms, they still received huge checks for their work. An average bonus of $176,500 is still more than twice the median household income of New York City of $76,607.
Wall Street bonuses contribute billions of dollars to New York state and city tax revenue, which is why the Comptroller’s office closely tracks and reports on it. As those windfalls rise and fall, there is an ebb and flow of tax revenue. In 2022, bonuses contributed $447 million less in state income tax revenue and $204 million less for the city compared to the prior year. The Comptroller’s office projects 2023 bonuses will generate $4 million less in state income tax revenue and $2 million less for the city when compared to the previous year, which the budgets were adjusted to anticipate.
The office estimated that the securities industry accounted for approximately $28.8 billion in state tax revenue (27.4 percent of the state’s tax collections) during the 2022-23 state fiscal year, and $5.4 billion in city tax revenue (7 percent of total tax collections) during the city’s 2023 fiscal year.
“Wall Street’s average cash bonuses dipped slightly from last year, with continued market volatility and more people joining the securities workforce,” New York State Comptroller Thomas P. DiNapoli said in a statement. “While these bonuses affect income tax revenues for the state and city, both budgeted for larger declines so the impact on projected revenues should be limited. The securities industry’s continued strength should not overshadow the broader economic picture in New York, where we need all sectors to enjoy full recovery from the pandemic.”
At least some of the bonus money bankers and other employees get to keep is spent in New York City. Most employees at financial services firms are working at least three days per week in the office again. Companies reported that 65 percent of employees were in the office on any given day in September 2023 (post-Labor Day) compared to 58 percent for all companies in the city, according to a survey by the Partnership for New York City. Forty-two percent of Wall Street employees ride the subway — a higher rate than the average worker in the city, according to the Comptroller’s office. They also accounted for an estimated 14 percent of economic activity in 2022.
“The financial sector’s ability to generate revenue and turn profit is critically important to New York,” the office said in a statement.
