My new column is online and in issue of TIME with the scary-looking banker on the cover. It’s part of a “Why Main Street Hates Wall Street” package that includes Allan Sloan’s take on “What’s Still Wrong With Wall Street” and Steve Gandel’s “Meet Ken Feinberg.” My contribution is mainly a summing up of the recent research of NYU finance prof Thomas Philippon, who has been trying to come up with answers to such important questions as How can we tell if the financial sector is too big? and How can we tell if Wall Streeters are overpaid? He doesn’t have a definitive answer to the first, and he and UVa’s Ariell Reshef have determined that financial sector workers are 30% to 50% overpaid. So there you go.
This last tidbit ties in to an interesting BusinessWeek.com story from a couple of days ago. It told of a new study (pdf) which found that, contra Steve Fussell, there’s no shortage of qualified science and engineering graduates in the U.S. It’s just that many them would rather go work on Wall Street (or at McKinsey) than at a pharmaceutical company or a tech startup. Because, you know, they’ll get paid 30% to 50% more there.
Philippon has written excellent jargon-lite versions of his research here and here. His work was also the subject of a Krugman column in April, a Lahart column in April, and a Surowiecki column in May. In June, Planet Money did a highly entertaining episode with Reshef on the whole Wall-Streeters-are-overpaid thing. (This column is part of my ongoing crusade to take the “new” out of newsmagazine.)
Update: As my sister notes in the comments, Floyd Norris has a column on the topic, and as tc125231 notes, so does Steve Pearlstein. Also, James Kwak offers a helpful Cliff’s Notes version of Philippon and Reshef on financial-sector pay.