Tale of Two Cities

The recession is over. Employers continue to lay off employees. Employees work for half of what they used to make. Hefty bonuses are back. America’s tale of two cities today is, at best, unnerving. It is, at worst, dangerous.

According to the New York Times, pay cuts are occurring more frequently than at any time since the Great Depression. Employees are taking a demotion and half the pay to keep a job. There was a time when that was hard for employers to pull off, since employees could go to another employer willing to pay the full freight. The problem is full freight jobs are few and far between.

According to the Wall Street Journal, major U.S. banks and securities firms are on track to pay their employees about $140 billion this year — a record high. Just a year ago, the same employers were being castigated for paying obscene amounts. Well, they’re back. The Obama Administration’s pay czar has been focused on discouraging excessive risk-taking, not so much on excessive salaries and bonuses.

The average compensation per employee at Goldman Sachs is on pace to reach $743,000 this year. This excess is necessary, they say, to keep talent, not from going to other U.S. firms, but to firms overseas.

It’s unlikely that employees whose pay has been cut in half are making six figure salaries. It’s unlikely that they’ll ever make six figure salaries.

Some folks keep worrying about socialism creeping into this country’s finances and government. I don’t think we have to worry about socialism nearly as much as we have to worry about greed gone wild.

Two cities with such a divergence of living standards and opportunities aren’t likely to coexist in the same place very long. I’m not sure what that means, but it can’t be good for the world of employment.