I read today about Obama chiding Wall Street for their reported $40 billion dollars in bonuses this year (even though they were down over the past few years).\u00a0 It does offend one’s sensibilities, I certainly agree.<\/p>\n\t
I mean…if risky mortgages are the source of the problem, then don’t bail out the banks, bail out the people…the banks get the money in the end anyway (since the people still have to pay the mortgage) and the people get to keep their homes.<\/p>\n\t
If you bail out the banks…the banks get the money, the people still lose their homes…which then means the banks get the homes………so the banks get the homes AND the money:\u00a0 And they were the ones responsible for the mess in the first place (to the losers go the spoils)!<\/p>\n\t
Seems like they’re making out like bandits.\u00a0 We lose our homes AND we pay to bail them out.\u00a0 But whatever….that’s another conversation (the gist being that it really ISN’T the bad mortgages that are causing banks trouble, otherwise bailing out the people would be a more logical economic and political solution).<\/p>\n\t
What the continuance of Wall Street bonuses really means is that pay for performance is a myth<\/strong>, and that is what it has to do with my job (HR Consulting).\u00a0 Pay for performance is the idea that each is paid (in some measure) according to what they contribute.\u00a0 If you do better, you get more.\u00a0 A bonus (since it is a BONUS and not part of regular pay) would be linked to some performance measure and if you meet that measure then you get the bonus.<\/p>\n\t This is where it gets a little human on us:\u00a0 The bonuses are largely paid out anyway (people set goals attainable within the normal flow of work, or managers “adjust” for externalities, etc.)\u00a0 In effect, bonuses are not pay for performance (otherwise Wall Street wouldn’t get any)….they are really just a part of base pay.\u00a0 In a good year you may earn 100% of a potential bonus; in a poor year you may still earn 75%.<\/p>\n\t Merit pay increases work the same way:\u00a0 The average salary increase is 3.5% or so a year.\u00a0 The average merit increase for good performers is 5%; top performers 7%.\u00a0 In other words, there is only a 4% difference<\/strong> in pay increases between those who are just drawing paychecks, and those who are the best of the best (the best of the best do get promoted though).<\/p>\n\t Anyone who’s ever worked in corporate America knows the top performers are worth 10x or more than the average worker.<\/p>\n\t Of course there is the issue of measurement (how do you know how much more someone is worth?), and the issue of fairness (would you work next to someone doing your job that is making 10x more than you?), and the holdover from manufacturing\/assembly line era of pay where a warm body is a warm body…anyone can pull a lever or start a machine, so everyone should make the same.\u00a0 And then there is simplicity:\u00a0 its easier to largely pay people the same.<\/p>\n\t Anyway, don’t blame Wall Street for their bonuses for the most part….its just part of salary.\n<\/p>\n","protected":false},"excerpt":{"rendered":" I read today about Obama chiding Wall Street for their reported $40 billion dollars in bonuses this year (even though they were down over the past few years).\u00a0 It does offend one’s sensibilities, I certainly agree. I mean…if risky mortgages are the source of the problem, then don’t bail out the banks, bail out the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_newsletter_tier_id":0},"categories":[6],"tags":[52],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p3IMYj-23","jetpack-related-posts":[{"id":504,"url":"http:\/\/chasingeden.com\/?p=504","url_meta":{"origin":127,"position":0},"title":"Why do banks need our deposits?","author":"kellio","date":"October 17, 2011","format":false,"excerpt":"How we think it works: We deposit our money at the bank and the bank then lends out that money to others, right? How it really works: People do make deposits, yes.\u00a0 Banks also make loans, yes. What I'm having trouble with is conceptualizing how they are connected.\u00a0 Banks don't\u2026","rel":"","context":"In "Inside My Head"","block_context":{"text":"Inside My Head","link":"http:\/\/chasingeden.com\/?cat=9"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":214,"url":"http:\/\/chasingeden.com\/?p=214","url_meta":{"origin":127,"position":1},"title":"Why we bailed out the financial sector: Debt is money","author":"kellio","date":"August 21, 2009","format":false,"excerpt":"I pride myself for being a hack, weekend economist.\u00a0 I admit it isn't going to make me rich, but it is interesting. 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Fiat money is money with no intrinsic value, backed by nothing of\u2026","rel":"","context":"In "Interesting Tidbits"","block_context":{"text":"Interesting Tidbits","link":"http:\/\/chasingeden.com\/?cat=8"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.financialsense.com\/fsu\/editorials\/2007\/images\/1-Dow.png?resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.financialsense.com\/fsu\/editorials\/2007\/images\/1-Dow.png?resize=350%2C200 1x, https:\/\/i0.wp.com\/www.financialsense.com\/fsu\/editorials\/2007\/images\/1-Dow.png?resize=525%2C300 1.5x"},"classes":[]},{"id":110,"url":"http:\/\/chasingeden.com\/?p=110","url_meta":{"origin":127,"position":3},"title":"Economics…the dismal science","author":"kellio","date":"November 10, 2008","format":false,"excerpt":"Banks are not using the Fed bailout money to ease the tight credit market.\u00a0 They are using it to shore up their balance sheets and consider acquisitions of weaker banks who were perhaps not able to get as much bailout money.\u00a0 It is simply making the concept of \"too big\u2026","rel":"","context":"In "Stories\/Observations"","block_context":{"text":"Stories\/Observations","link":"http:\/\/chasingeden.com\/?cat=11"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":479,"url":"http:\/\/chasingeden.com\/?p=479","url_meta":{"origin":127,"position":4},"title":"Capitalism, Jobs, and Supply Side Economics: Companies are not in business to hire people. They are in business to make money.","author":"kellio","date":"September 19, 2011","format":false,"excerpt":"The supply side argument goes that if companies (and the rich) have more money (through incentives, lower tax rates, etc.), they will use that extra money to invest and create jobs. This argument is silly. \u00a0Republicans have been making this argument since Reagan, and perhaps they really believe it...but it\u2026","rel":"","context":"With 1 comment","block_context":{"text":"With 1 comment","link":"http:\/\/chasingeden.com\/?p=479#comments"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":134,"url":"http:\/\/chasingeden.com\/?p=134","url_meta":{"origin":127,"position":5},"title":"Holistic thinking, Complexity and Inflation","author":"kellio","date":"February 19, 2009","format":false,"excerpt":"Ok...really its two different topics, so I'll take holistic thinking first. 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