Quote:
Originally Posted by Ian Curtis
I don't think this is true. It takes capital to run a business and invest in R&D, and businesses don't have that kind of capital sitting around. In December 2006, the Ford Motor Company was hemorrhaging cash with no clear turnaround. They went to investment banks and mortgaged the entire company for some $23.6 billion. Ford is now profitable, and was the only one of the Big Three that didn't go to Uncle Sam to get bailed out. While they cut back big then, their recovery is remarkable, recently reaching an agreement with the UAW to bring on some additional 12,000 workers by 2012. Obviously, they need to hire engineers to design the new cars too.
When the airplanes are sold to the airlines, the airlines purchases are all financed. Airlines have notoriously slim margins, they don't keep bales of cash in the back room.
Good investment bankers move money... but they move it to places where they can make the most off of it. Banks don't like to see defaults, they like to see those interest payments.
How do you create wealth without generating economic growth? People certainly get overenthusiastic and cause bubbles, but during the dot-com bubble and the housing bubble there were plenty of people making real money from others overly-enthusiastic viewpoints.
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I-bankers net around $100k after bonuses in their first year of employment. That $100k rounds out to roughly $30/hr since 1st-year i-bankers work 90+ hours per week, yet that still pales in comparison to the roughly $40k per year at 60+ hours a week. Why? The hours get better as an i-banker, while as a teacher they do not. The compensation can get far better for an i-banker, whereas a teacher's salary is randomly frozen for whatever budget reason. On top of that, i-bankers' bonuses usually have much larger swings that correlate with the economy. I few i-banker guys I knew from college grossed $200k last year after 3 years with a firm.
I still fail to see why an investment banker, with an average salary + bonus package of $100k+
starting out has the
skill to merit so much larger of a salary than a teacher, which is the context of the article. Averaged over 3 years, the best "newbie" i-bankers can net over $500k (was $750k in the bubbles, $200k in the busts), whereas the best "newbie" teachers will be lucky to net $150k. Teachers may have other means of compensation that come about later, but in too many instances those means of compensation are threatened and eliminated. Additionally, i-bankers are able to invest magnitudes more of their personal money in order to generate even more wealth: an opportunity that most teachers simply do not have due to numbers alone.
How much these two professions make is more due to the focus of their careers (generating wealth vs. generating knowledge) rather than their actual skills. That the authors argue to reduce teacher compensation further based upon skill sets is (IMO) unscrupulous.