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We recently noticed a Facebook post that channeled popular anger over bonuses for people who work in the financial industry.
It said: "Bank of America could create 878,300 jobs with benefits if they spent their 2010 bonuses on job creation."
We wondered if that was accurate.
After some Internet searching, we found what appeared to be the source of this factoid. It’s a report called "Big Banks, Bonus Bonanza," released by a coalition of five groups, led by the Service Employees International Union, or SEIU. Here’s an excerpt:
"Despite unleashing havoc on the global economy, Wall Street is once again getting ready to pay astronomical bonuses this year. The nation’s six largest banks alone are on track to pay their bankers a staggering $143 billion in bonuses, benefits and compensation ("bonus and compensation"), more than enough to fill the $130 billion total budget gap for all 50 states in (fiscal year) 2011. If Wall Street pumped this money directly into the economy instead of paying it to its bankers, it could create 3.6 million new jobs, and lower the unemployment rate by 2.3 percent. Bank of America tops the list, with $35 billion in bonuses and compensation set aside for its bankers."
At the end of the report, the authors added an appendix titled "Potential Job Creation by Bank."
The appendix said, "See below to see how many good-paying jobs with benefits big banks could create if they spent their bonus on job creation instead of banker bonuses." In a footnote, the authors added that the figures are "based on a cost of $40,000 per job," although they don't say why $40,000 was chosen.
The figure listed for Bank of America? Exactly 878,300 jobs -- essentially the result you get if you divide $35.1 billion by $40,000.
But there’s a problem. We were confused by the report’s use of the words "bonus and compensation," since the Facebook post (and the SEIU appendix) referred only to "bonuses."
It turns out that the $35.1 billion figure is not simply bankers’ bonuses -- it’s all compensation paid by the company (encompassing salaries, benefits and bonuses) to every employee of Bank of America. That means it includes all compensation paid to executives, tellers, janitors and anyone else you can imagine who works for BofA.
The $35.1 billion figure can be found in table 5 on page 27 of the 2011 Bank of America annual report. We confirmed with a company spokesman as well as two outside experts that "noninterest expense" for "personnel" -- which is how the annual report labels the $35.1 billion figure -- means salaries, benefits and bonuses for everyone employed worldwide at Bank of America.
Knowing all this, we can calculate how many jobs $35.1 billion in compensation actually created. It’s 288,000 -- the current number of employees at Bank of America.
What if you just looked at bonuses alone? How many $40,000 jobs could you get from just by divvying up the company’s bonus pool?
The company doesn’t officially release its bonus data, but we did find a Bloomberg news report that estimated that Bank of America paid its investment banking employees about $4.4 billion in bonuses for 2009, citing "a person close to the bank."
Dividing this bonus pool into $40,000 increments gets you 110,000 jobs, far less than the 878,300 claimed in the Facebook post, though it’s quite a bit more than the 10,000 people the investment-banking unit actually employs -- many of whom probably earn more than $40,000.
The Facebook post -- and the SEIU report it was almost certainly based on -- incorrectly said that a pot of money consisted of bonuses when it in fact included all forms of compensation for all employees at the company. That made the mathematical calculation meaningless. Using just the company’s investment banking bonuses would create 110,000 jobs costing $40,000 for a year -- only one-eighth the number claimed in the post. We rate the claim Pants on Fire.
Facebook post on Bank of America and job creation, accessed April 24, 2012
SEIU, "Big Banks, Bonus Bonanza," undated
Bank of America, annual report, 2011
Bloomberg, "Bank of America Said to Pay Average Bonus of $400,000," Feb. 3, 2010
Reuters, "Banker pay and bonuses for 2010," Feb. 8, 2011
Email interview with Satya Thallam, economist with the Mercatus Center at George Mason University, April 24, 2012
Email interview with Lawrence J. White, economist at the Leonard N. Stern School of Business at New York University, April 24, 2012
Email interview with Jerry Dubrowski, spokesman for Bank of America, April 24, 2012
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