If you are starting your career now, I have bad news. The effects on compensation for those who start their career during a weak market is long lasting and painful. The reason is obvious, wages are fairly sticky.
Issue 1: If your pay package starts out low, it's difficult to make up the difference at your current firm
For those of you who have worked in salary and bonus jobs before, you know the year end bonus discussion often works something like this: the bonus pool is up x% this year, so your bonus is up x% plus or minus some amount for your perceived relative contribution compared to the average person. So, if you start out with 20% lower compensation than someone who started in a better environment, you will likely get similar percentage increases in pay each year. In other words, you don't get some magical catch-up just because you were 'underpaid' to start with. Often, this means it will take more than a decade to catch up with those who started in better environments, if you ever do.
Issue 2: If your current compensation is low, prospective employers will try to lowball their offer
When you interview for a new job, one question that is almost always asked is, "What is your current comp package?". This is an attempt to anchor their offer on your current comp package, even if you are earning less than market currently (or more accurately, especially if you are earning less than market currently).
Here is a good study that basically proves what common sense would have told you about how the job market at college graduation impacts longer-term compensation:
http://mba.yale.edu/faculty/pdf/kahn_longtermlabor.pdf
The bottom line is that the financial services industry is in a lot of pain (in case you've been in a coma for the last 5 years and hadn't noticed) and those who enter the industry now are likely to feel the pain as well. Especially if you are working for the man.
My suggested remedy: Try to move into a role where you eat what you kill as soon as possible. Get a revenue share, get commissions, get equity (meaningful equity, not just comp held back from your publicly traded employer that you already earned), or at least set yourself up so you can do so soon. This means you need to take some risks in the short-term to remove some risk in the long-term.
What are your thoughts?
the way to make money on wall street is to shop your talent at other firms.
management will pay you as little as possible until you threaten to move. it's like baseball.
but i concur that the job market is really bad right now in ibd. heard a few more guys were laid off today from my bank. and with such a massive pipeline of kids wanting to work on the street, bonuses for juniors are definitely coming down.
I think someone just got laid off.
Not totally buying it. Finance is a cyclical industry. Just because those starting now on the Street now do not make the same bonuses as Analysts/Associates of year's past does not mean that when these same people become senior Associates/VPs/MDs that comp will not have exploded back to some ridiculous level.
Right now, the spotlight is on bonuses at any firm connected to deposit taking. Eventually this will take care of itself. No clue how it will happen, but it will one way or another. Maybe the TBTF banks decide to spin off their IB operations.... Maybe enough good people at these TBTF places jump ship for partnerships like William Blair or BBH where their comp is out of the public eye. The talent drain would further hit IBD in the TBTFs, possibly causing them to be folded. Maybe some version of Glass Steagal (sp?) comes back into effect forcing a spin-off of some sort.
This will all get worked out naturally.
Cmon Poops, lighten up
As someone just started career, I feel depressed by reading this. However, I think it's time for people to adjust their expectation about jobs/comps. Not happy with the compensation? Should be grateful still have a job in this market! Accept it and move on!
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