Wall Street's Big Payday Makes the Fed's Job Harder
Compensation for higher-skilled positions is starting to show rapid increases, threatening to turbocharge a new phase of inflation.
Wages are starting to rise for the higher end.
Photographer: Paul Yeung/Bloomberg via Getty Images
For more than a year, an egalitarian narrative dominated the discussion about U.S. wages. Lower income workers were seeing the biggest pay increases while gains for better-paid employees lagged behind. But the quarterly results posted by banks last week may upend the dialogue, and when Federal Reserve policy makers meet this week, they may feel additional pressure to keep broadening wage gains from adding to inflation.
The five biggest American banks boosted compensation by 15% last year, more than twice as much as consumer price inflation, with an expectation of more increases to come. JPMorgan Chase & Co. raised salaries for junior bankers for the second time in six months, and other banks made similar moves. What’s more, there were reports that those bankers occupying top-earning positions are seeing even bigger raises. At Goldman Sachs Group Inc., some 400 executives who fill the investment bank’s highest rung are set to receive a special one-time reward in addition to annual bonuses.