But what does the assertion that the employees of the financial sector are paying too much? To what extent and for whom they overpaid? Like most people, I am inclined to believe that any person whose salary is higher than mine, overpaid. However, I understand that this is not the most accurate test and not the most rigorous test.
Economists tend to more balanced and reasonable conclusions. For the National Bureau of Economic Research, Thomas Philippon and Reshef Arill examined data on wages of employees working in the financial sector and other industries in the U.S. over the past hundred years. Their opinion really stunned.
Taking the criterion of education and skills of employees, they found that the payment of the financiers was extremely overvalued until the Great Depression of 1930, and the qualifications of people do not always comply with their duties. After the Depression, as a consequence of the introduction of new and more complex regulation, payment of the financial sector returned to normal and remained stable until about 1990. Starting from 1990 until 2006, wage income is increasing rapidly. And the difference in salaries of employees of financial firms accounted for a third to a half more in comparison with the salaries of employees of the same skills to similar positions in other sectors.
Hence, there is reason to assert that members of the financial sector overpay, but why? Philippon and Reshef argue that the regulation or, on the contrary, deregulation is an important part of history. Deregulation increases the opportunities for innovation and trade, and is also conducive to the growth of profits. There is also evidence that the payment of salary and remuneration in less regulated parts of the asset management sector - hedge funds and so on - all better than their competitors, regulated by the Commission on the Securities and Exchange Commission.
But is this really a sufficient explanation? Increasing payroll employment is thought-provoking: why no new competitors, why they are unable to enter the market? In other parts of the economy where we see the super-profits usually have found the lack of competition or the exploitation of insider information, which exclude new entrants. This may partly be the cause of the situation.
An alternative hypothesis has recently came from the London School of Economics. The researchers argue that the fragile speculative industries investors are difficult to control and monitor all of their investment managers. They can see the short-term return on investment, but they have no clear idea about the process.
On the rise of managers can demand more and more high paying, but ultimately, these higher incomes will reduce payments to investors (in this phenomenon Bernie Madoff may be an example of reduction ad absurdum), and slow the growth of the sector. Managers to justify their salaries, take big risks in search of more profitable investment, which leads to overheating and the price crisis. In the past two years we have seen the last part of this cycle.
If this explanation is correct, then what do you do then? Politicians are considering many options - from raising tax rates to fines for certain types of awards. Higher taxes can be justified for other reasons, but is unlikely to solve the problem. Regulatory organizations struggled with it for many years without finding solutions.
Bank of England showed the way by following which, policy fees may create risks for banks and said that, the result will be "increasing interest and growing concern for observers and regulators." One way or another, but from 1997, when the forecast was made, progress was very slow on both sides of the Atlantic.
And then the question arises - is the shareholders do not need to show more interest? In the end, is at stake is their money. Now shareholders have virtually no interest in salary policy, but it is clear that without pressure from their side, the issue will be solved.
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