Making “minimum wage” as an IB analyst
I’m sure we have all seen/heard on the news, social media, one of your hating ass friends or even just this forum, someone making the statement along the lines of: “Investment bankers make less than minimum wage working 80-90 hour weeks, why work so much for so little, etc” I don’t understand the math on this, Every time someone makes this argument about making less than minimum wage as an IB analyst, no one ever breaks down the math. Most banks are paying An1’s 110k, let’s say you work 90 hour weeks every single week (not exactly accurate either but let’s rock with it for lack of argument sake), 1 week vacation a year: That is 4,680 hours a year (51x90). 110,000/4,680 ≈ $23.50 an hour, excluding any sign on bonuses or year end bonuses (even though in a normal comp year we know 40-60% bonuses for An1’s are very feasible). New York Minimum wage is $14.20 per hour, California Minimum wage is $15.50 per hour, Chicago Minimum wage is $15 per hour, Texas Minimum wage is $7.25 per hour, London Minimum wage is ≈$9.50 per hour (depending on exchange rate, £8.91 per hour) Am I missing something? Also this argument is flawed because the IB pay progression is massive and it is not uncommon to have your compensation double in 3 years. Cheers, Walnut
I think that it's more of a saying to emphasise that IB salaries aren't as good as they seem when you account for the hours. The hourly pay in IB is not that great compared to other professions with a pretty high wage such as equity research, corporate banking, private banking, consulting, asset management etc. This is especially true considering that each incremental hour gets much harder, so hourly wage might not be the best measurement. Making $30 an hour when working 100 hours a week is not comparable to making $30 an hour when working 40 hours a week since those additional 60 hours are so much more difficult than the first 40.
However, you make a great point about comp progression. While some of the other industries I mentioned above will surely appear to be very competitive on an hourly basis vs. IB for a first-year position, the comp progression is often much slower compared to IB.
it's all about 'hatters gonna hate'
Just for the sake of a more apples to apples comparison:
-Post-tax hourly wages should be compared rather than pre-tax
-Assuming a marginal tax rate system, the 110,000/year will be taxed at a much higher effective tax rate than a minimum wage income
-Therefore spread between IB hourly wage and minimum wage is smaller on a post-tax basis
-Effect (reduction in spread) would be more important in higher income tax jurisdictions
You forgot to add personal taxes for the respective brackets. You have more calculations to add.
If you work 90hrs at a minimum wage job, 50 of those hours/wk would qualify for time and a half
You also have to remember that starting base for IB Analysts was like $70K only like 9 years ago. This adage has been kicked around since long before then.
Minimum wage hasn't changed. IB comp has.
Minimum wage has absolutely changed in New York, which is where most banking jobs are.
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