Bonuses make up a much larger share of earnings for employees in the finance and insurance industry than in any other major service-providing sector, according to a Labor Department report.
The chart shows the percent of gross earnings — defined as the sum of wages, overtime, bonuses, shift differentials and paid leave — held by bonuses. In financial services, bonuses account for 6.5 percent of gross earnings; the percentage for the next highest bonus-getter is less than half as large (professional, scientific and technical services, at 2.9 percent).
Within financial services, bonuses as a percentage of gross earnings were especially high for employees who work in securities, commodity contracts, funds and trusts. There, as you can see in the chart below, bonuses make up 12.7 percent of gross earnings. (The blue bars, labeled “supplemental pay,” also include overtime compensation and shift differential pay, which is a premium paid for working during hours that are less convenient than those of the typical workday.)
So why are bonuses so big — not only in absolute numbers but also relative to salaries and gross earnings — in the financial sector? The tax code appears largely responsible.
For example, some research has found that a 1993 change to the tax code intended to curb executive pay at public companies may have instead unintentionally increased it, and has had especially detrimental effects to pay incentives in the financial sector.
Update: Here is another (more comprehensive) paper on other Congressional efforts to discourage outsize pay, and the unintended consequences of those policies.
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