“I’m talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.”
-Gordon Gekko, “Wall Street” (1987)
A few years ago there was an email floating around that claimed to show you could earn more per hour working at McDonald’s than at an investment bank.
Sure, making six figures as a 23-year old is nice, but if you have to work 120 hours per week, you can’t possibly be making that much per hour, right?
Intuitively I thought “no, but you must be making more than a McDonald’s worker.”
But sometimes intuition is not enough.
Best Case Scenario
For entry-level investment bankers, the best case scenario happened this past year in 2007. Base salaries were $60,000 and bonuses were $90,000, for a grand total of $150,000 in compensation. Not bad for recent college graduates.
On average, investment bankers will work around 90-100 hours per week in their first year. This might be a bit high or a bit low (!) depending on the bank and group, but we’ll go with it for now.
With 52 weeks of work per year (there’s no vacation, thank you very much) and 90 hours per week, you would have earned $32.05 per hour ($150,000/(52*90)) in 2006-2007. At 100 hours, that drops to $28.85.
Even in the worst case scenario last year, where you worked 140 hours a week, every week, you would still be at $20.60 per hour. And no bankers work that much on a consistent basis (ok, UBS LA might).
But 2007 was a great year in the world of finance, with bonuses at record highs. What if we journey back into the Dark Ages of 2001-2002 and look at investment bankers’ salaries?
The Dark Ages: 2001-2002
Back in these years, Analysts were lucky to get $10,000 for their bonuses. Sometimes they just received lumps of coal. And they still worked a lot, but made a ton of pitch books rather than working on actual deals.
A $10,000 bonus and $60,000 salary would imply $14.96 per hour at 90 hours a week. So you’d be in administrative assistant range, but still not quite at McDonald’s level.
But what if you did nothing but make pitch books for 140 hours a week, every week? And never got deals to work on because the dot-com bubble just burst?
You would make $9.62 per hour.
Ok, But What About If I Worked At McDonald’s?
According to this Wiki Answers page on McDonald’s (very reliable source, I know), the wage is $9.30/hour for those under 17 and $9.57/hour after “4 months of training.” We’ll ignore that this appears to be the wage in Australia and is therefore likely in Australian, not US dollars.
So it looks like you could never really do worse per hour than you would by working at McDonald’s.
Or Could You?
If you earned $0 for your bonus and only made $60,000 while working 140 hours a week, that would be $8.24 per hour. AKA, below McDonald’s wages. No models and bottles for you.
So theoretically it is possible to earn less than a McDonald’s worker as an investment banking analyst, though not terribly likely.
Unless you happen to start in the middle of another huge recession and get stuck making pitch books 140 hours per week.
Yes, I know Steve Schwarzman makes way more than $41.21 an hour.
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Tags: investment banking, investment banking jobs, pitch books, understanding investment banking
[...] & Inquisitions (cute) explores Investment Banking Salaries vs. McDonald’s Hourly Pay and appeals to WikiAnswers to find out what the hourly pay at McDonald’s is (the answer is [...]
I love this post.
It is interesting to see the numbers. I use to see people who tracked their hours each week religiously then ran all kinds of analysis on it at the end of the first year. Most were very disappointed with the hourly rate they saw.
Yeah the hourly rate is pretty depressing. The interesting thing is even as you get much higher up, the hourly rate never becomes mind-blowing. The average MD, for example, makes around $1,000 per hour… that’s really good, but not 100x better than analysts or anything.
Still, McDonald’s has far worse exit opportunities.
You forgot about being in the highest tax bracket. If taxes are included, you make less than a McD worker.
IRS: Yeah, I purposely did not include income taxes because everyone’s tax situation is different and because for the first half your first year, you are actually not in the highest tax bracket since you only work for half the year without receiving a bonus or anything.
But you’re right, at certain levels the tax differential would drop you to below a McD salary.
Don’t forget, McD’s workers get paid overtime after 40 hours.
Depending on the location, it could be 1.5x or 2x hourly pay!
Argh*&^#*%@#$
GoGators: Very true, and yet another reason to consider McDonald’s vs. banking.
Tax-wise it might be better too…
Back in 1994, FI analysts were paid $34k and $5-10k bonus for 95 hour weeks.
So, about $8/hr, or less than a McD employee who would get overtime.
$34K and $5-10K bonus? OMG. Did anyone even do finance back then?
After adjusting for a few errors: i.e. in 1994, McDonald’s pay was more like $4.50, in 2001 IB Analysts were starting at considerably less, but let’s peg it at $50,000, and in 2007 IB Analysts are being re-org’d so some only receive half their base and no bonus.
After making those adjustments, the takeaway is that the spread grew tremendously up until 2007, reversed sharply in late 2007 and early 2008 and hopefully temporarily, and will likely bounce back. For instance, in 1994, burger flipper was making around 50-60% of the IB Analyst pay using the high low estimates above, in 2001 that had dropped to somewhere in the 40% handle, and by 2007 it was just 25%!! So, if you had just saved all your money and skipped that silly 4-year degree followed by an MBA, you’d be ahead (at least at the end of your Analyst program, and especially if you just got re-org’d).
True, the spread has really come down lately. Believe me I’ve thought about employment at McDonald’s if I get fired anytime soon…