Junior Bankers Have Seized the Upper Hand on Wall Street, for Now

At first, Goldman Sachs Group Inc. executives watched with puzzled detachment. One competitor after another was bumping up pay for junior bankers—the entry-level grunts who can churn out 100-plus-hour weeks trying to get their footing in the business. But as the raises kept spreading, Goldman managers grew agitated. One senior executive groused that rivals were using gimmicks to gain an edge in recruiting because they lacked the prestige of Wall Street’s premier investment banking franchise.

Gimmick or not, in the span of a few months, the sticker price for a freshly minted college graduate in top-level banking has quickly shot up, reaching and then surpassing $100,000—a guaranteed salary to be padded later with a chunky bonus. Ultimately even Goldman caved, an acknowledgment that its name alone wasn’t enough to ensure top candidates would welcome its lukewarm embrace.

Out in the real world, a six-figure entry-level salary is another example of extreme inequality and the way finance has come to dominate the economy. The raises put junior bankers on track to earn almost five times—or more—the median wage of young college graduates. By inflating paychecks right out of the gate, banks are likely exacerbating the pay gap with other industries for years to come.

The concession is almost a rounding error on companies’ balance sheets. Yet it’s still surprising to see Wall Street bosses, who negotiate for a living, lose an inch of ground. The new recruits suddenly feel as if they call the shots because banks are desperate for talent. Work has been piling up—along with profits—amid growing confidence in an economic rebound. Clients that might have held off on acquisitions and other deals earlier in the pandemic are now clamoring for bankers’ attention.

The story behind the bidding war actually starts at Goldman Sachs, of all places. A group of 13 first-year analysts in its investment banking division assembled a PowerPoint-style slide deck that detailed the rigors of Wall Street life, including sleepless weeks and endless demands for, well, slide decks. The presentation leaked in March. That small rebellion lit a fire that’s forced virtually every bank to respond. It’s an outcome that would have been unthinkable in the 1980s, at, say, Michael Milken’s hard-knuckled Drexel Burnham Lambert, where modern investment banking took root. “Mike Milken would have asked them to resign,” says John Mack, the former chief executive officer of Morgan Stanley. At the same time, Mack recognizes that today is not yesterday. “It’s good for them to speak up. They have to represent themselves,” he says.

But will the raises mark the start of a kinder, gentler era for rookies? Will the win-at-all-costs industry suddenly offer a little work-life balance? It depends on how strongly you feel about the two-day weekend. Senior leaders have promised before to temper demands, or at least grant Saturdays off, only to backtrack when the next surge in deals arrived. After all, the grinding system has proved it can turn history majors into billion-dollar dealmakers. “I would have paid for the training I got in my first job,” says Lloyd Blankfein, former CEO of Goldman Sachs. “Thankfully I didn’t have to.” When he entered the workforce in the mid-1970s, he says, “work-life balance did not top my list of concerns.”

The top echelons of banking are still stacked with people who see corporate jet-setting and outlandish paydays as the justly earned spoils of crazy hours and sacrificed family time. “There’s a tremendous amount of camaraderie by working together on projects over the weekends,” says Mack, who earned $8,500 (about $66,000 in today’s dollars) and a 10% bonus when he got his start in the 1960s. People may “bitch and moan and complain, but they like the experience of bonding. Status quo isn’t always fine, but it’s proven it works.”

The leaked presentation out of Goldman ricocheted across the industry because it resonated with the experience at every investment banking house amid the pandemic—when working life was stranger than ever even as everyone was busier than ever, too. At first, firms were unsure of how to respond. Soon came expressions of sympathy, followed by free Pelotons, one-time bonuses, and then outright raises.

When Goldman finally increased pay in August, it sought to take the pole position by offering $110,000—a figure meant more as a message than a final target. Essentially, the mantra at Goldman is that it pays for performance, and the real bottom line isn’t drawn until bonuses are set. It ended up holding the top salary spot for barely a week before boutique advisory company Evercore Inc. claimed it with $120,000 salaries. One yardstick of banks’ desperation: At least two companies— Guggenheim Partners and Bank of America Corp.—have bumped up their base pay twice since the bidding frenzy began.

Adam Cotterill, who worked in the junior ranks of Goldman until last year, says it isn’t surprising that the solution banks have landed on is not so much to improve the job but to pay more. “Trying to make changes to the life of junior bankers has proven to be really challenging,” he says. To work through the crazy hours, Cotterill recalls putting on headphones blasting faux rain noise and taking power naps in bathroom stalls. “There are a lot of negative repercussions,” he says. He left Goldman for another finance job, quit because of the strains, and is now a blogger

It seems to be a truism that the main thing Wall Street can offer its talent is more money. (That’s basically the business.) But prestige and the lure of a lifelong career path have always been part of the equation, too. Ambitious grads who may once have gone straight to banking are also looking at Silicon Valley, or, better yet, founding a startup. Wall Street is “viewed less glamorously now than maybe it was 25 or 30 years ago,” says Jimmy Dunne, a veteran banker at Piper Sandler Cos. “Everybody wants to be the inventor, the creator, the boss. When they see two young guys announcing a deal in a disruptive kind of business, most people would say, ‘Would I rather do that or work as an analyst for three years?’ ”

Blankfein, who ran Goldman Sachs for 12 years through a banking boom, a bust, and then the recovery, has a word of caution. The newest class of bankers shouldn’t assume they’ll always be able to dictate terms. “There is a market for talent, like anything else, and markets have cycles,” he says. “I hope those who are being recruited in today’s sellers’ market for talent can keep perspective.” He adds: “I don’t care what profession a young person is going into—hard work and grueling hours are necessary for learning.” It’s almost a certainty that the cycle will turn again and jobs will start to feel less secure. When that happens, the old salts in charge will be happy to make sure the upstarts know it.
Read next: Why Silicon Valley’s Asian Americans Still Feel Like a Minority

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