Investment Banking Salaries Vs. McDonald’s: Hourly Pay
“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
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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…
Oh no!!! What about models n’ bottles?? You mean you have to be moderately attractive and have game to get laid? Meaning… you can’t spend $300 on a $20 bottle of Absolut and have a coked out model chic give you a few cheap lap dances in VIP and tell you she’s on the rag minutes after last call? Haha. I see something terribly wrong with all of this. First, instead of a coked out model girl with STD’s, I’d go for a fine college girl whose dad is the editor of a major ski magazine. Next, I’d have her buy ME whatever I want. It seems that Investment Banking has become a bastion for D & D fans and avid X Box players. It’s a far cry from the pimped-out, glutinous 80’s.
Yeah things aren’t what they used to be. There are certainly some nerdier people in the field these days.
Inquistor:
Are you still an investment banker?
Analyst? Associate?
If you get a gig as an Analyst, do you need to do an MBA or MFin or an MFE to steadily move up?
How long does it take to go from Analyst to Associate and up to even higher levels?
How good of a peion do you have to be? What if you’re a bit cocky due to a modest upbringing?
Is I-Banking the epitomy of corporate?…as in cubicle cultures, lame employee parties, lifers??
By the time I’m thirty-five, going in to the game at 26, ceteris parabis, how much cash could I have amassed by the time I’m 35?
How the helllllllllll do you not go insane with such a psycho schedule?
Thanks. Sorry for the ridiculously large set of questions, however, it’s my life and any advice from a bard like yourself is useful in the end….
No I am no longer in the industry.
You “need” no degrees to move up in finance except an MBA can be helpful for senior-track positions, depending on the firm in question (some make you get it, others do not).
Analyst-Associate - 3 years. Higher levels - VP takes 3-4 years, then VP to MD could take 4-5 years or more.
Uh it’s hard to answer your question specifically but if you start at 26, have no outside interests or anything else until you’re 35 you can probably save up $2-3 million.
Not going insane: Well, there’s a reason why I left…
My next BIG question… What are the exit opportunities? Do you learn anything valuable that will seal up a nice deal afterwards? The actuary gig sounds much better. Even at a consulting firm where you don’t work the average 40 hrs, 60 hours or more is absolutely unheard of. My math degree might be a lot more useful in that arena. I don’t want to jinx myself, but I’m pretty sure I have a dope internship waiting just about anywhere next summer. it appears you can make beaucoup dough. Furthermore, when I spoke to one of the senior level actuaries at a major consulting firm, he said he clocks in the 200k range and since he lives in Denver, real estate is new, nice, and CHEAP compared to NYC or San Fagsisco. He has definite job security (assuming liberals don’t try to push soc. health care), and since the company is not publicly traded, the profits are distributed in bonus. He will be a principal next year which means he will be of 30 people who take most of the bounty when bonuses hit. That’s when you cash in at those places. It seems like a nice path to a risk management gig too…. The truth is, I enjoy doing math and love prob and stat. At investment banking, it seems like theres not much of a quantitative side.
What do you think of that shpeel? As in actuaries.. What do you know about them?
Yes, you can definitely get much higher paying jobs (as in $500K+) afterwards. Nothing else really compares in terms of exit opportunities, actuarial work is not even close.
Just as a point of comparison, partners at PE firms often make from a few million to tens of millions per year… and the ones at the biggest firms can make hundreds of millions in cash.
Of course, very few people get that far and it takes 20+ years to reach that. Also, there are diminishing returns to money once you get to that level.
However, if you really do like math then banking is NOT for you, it’s a joke quantitatively.
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