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CEP Occasional Paper
Bankers and their bonuses
Brian Bell and John Van Reenen
February 2013
Paper No' CEPOP35:
Full Paper (pdf)

Tags: wage inequality; financial services; bonuses

The pay of financial sector workers (“bankers”) is a focus of public concern especially since the onset of the financial crisis. We document the remarkable rise in the share of aggregate pay going to those at the very top of the distribution over the last decade in the UK and highlight the role of the financial sector. Rising bonuses paid to bankers accounted for around two-thirds of the increase in the national wage bill (“earnings pie”) taken by the top one percent of workers since 1999. Surprisingly, even after the crisis bankers took at least as large a share of the earnings pie in 2011 as they did at the peak of the boom in 2007 and saw no worsening in their employment outcomes relative to other similar workers. Having described the scale of bankers’ pay, we discuss the policy responses that have been proposed to address the issue such as transparency, numerical bonus targets, bonus clawbacks and taxation.

This paper has been published as:
The Economic Journal V124, F1-F21 (February 2014)