I can't help thinking there is a desperate shortage of bankers worldwide.
The average banker should expect to earn over £1.5m in bonuses each year. To understand this phenomenon, think about the difference between Tom Cruise and McDonalds. In about 3 seconds I've obtained the box office results for the last few Tom Cruise films: Mission Impossible - $195,042,377 Edge of Tomorrow - $100,206,256 Oblivion - $89,107,235 Pretty decent. In fact his lowest grossing film over the last decade was a mere $15m, and that is a bit of a freak really, they are much more typically was around the $100m mark on average.
So hiring Tom Cruise to be in your film is like buying a golden goose. That's why he'll get paid tens of millions to be in the film. Now imagine this, imagine there were actually 5 Tom Cruise actors, all identical and all able to bring in that kind of cash for a film. If a film company wasn't happy with Tom Cruise #1's high fees, they could go to the Tom Cruise who is out of work and offer him less. The Toms would have to engage in a bidding war to win the business and they would all be taking lower wages. It is the simple law of supply and demand. Now imagine I walk into a McDonalds and ask £400 an hour to flip burgers. It's not nearly as much as Tom gets paid for his films, but you can be as certain I'll get turned away as you can be certain of Tom making a box-office smash hit. The reason is there are many many people that would be willing to work that job for significantly less than that, and so the McDonalds guy simply can go elsewhere and pay less. So Tom Cruise gets paid millions because he's one of the few people that can do what he does, whereas a McDonalds person gets paid minimum wage as there is no shortage of people willing and able to do that job.
So if we're worried about Bankers salaries, isn't it just a problem that we have a shortage of Bankers? The demand is so great to hire their skills, and there is such a shortage of able persons to do the job, that the banks are having to pay very large sums of money to get and keep them there. How about we just start a massive training drive to deliver the next generation of bankers to fill the demand? To be honest I don't feel that great about the idea either. I think a more basic problem of bankers receiving high wages, is how banks make those sums of money at all. There is an interesting measure of financial services industries which calculates the percentage of the economy that is down to financial services compared to other industries that like, actually do something or make something for people.
Clearly financial services are important, and can be a great help to economic prosperity. The ease of paying people online for example is one of the main ways I make money as a tutor. Easy access to car loans, mortgages, business loans, credit cards and other financial services is actually quite useful for building an economy. It is however, not the economy. It cannot actually make anything, it is the grease for the wheels and not the engine. We have in the UK around 13% of the economy roughly devoted to financial services. Compare that to Germany which is more like 3%. To me it's a bit like going to a car wash where there are about 20 guys fetching water buckets and only one guy with a sponge actually doing any work. Sure he's got ample supply of the tools and means he needs to do his job, but he's the only one actually pulling his weight and getting the show on the road.
I'm not knocking the banking sector, but I think it has gotten a bit bloated compared to what we really require to get along. Trading on the stock market is all well and good, but the trader can only make money if the actual company stock he's buying makes money. And it's not like any body else's life has gotten better when he makes a killing on the stock market. Whereas when you buy an apple, your life has actually been improved because you can now eat that apple, so the providers of the apple, the farmers and shops etc, are getting financially rewarded for helping other people, as they should. I don't even begrudge Mark Zuckerberg his wealth because to be honest Facebook has helped millions of people worldwide do what they could not do before he made it. As I said financial services have their place and they do to a certain extent contribute to the success of society. But do we really need hundreds of highly strung traders making millions sitting at a computer fiddling with bits of money back and forth? Banks make their money solely on debt, maybe the ridiculous bankers salaries are a sign we're borrowing too much?
(Published on 30 May 2016)