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At her presidential campaign kick-off rally June 13, Hillary Clinton said the rich are getting richer, while many Americans are struggling to make ends meet. Case in point: the disparity between Wall Street hedge fund managers and kindergarten teachers.
"While many of you are working multiple jobs to make ends meet," she said, "you see the top 25 hedge fund managers making more than all of America’s kindergarten teachers combined. And, often paying a lower tax rate."
Is the salary gap between kindergarten teachers and hedge fund managers really so wide? We decided to check it out. (We previously looked into a Clinton claim about taxes among the working class and the ultra-wealthy.)
The best data we could find on kindergarten teachers comes from the Bureau of Labor Statistics. Other statistical sources, such as the National Center for Education Statistics, don’t separate out kindergarten teachers specifically.
According to a 2014 BLS report, there are about 158,000 kindergarten teachers in the United States. The figure includes teachers from both public and private schools, though it excludes special education instructors.
The average annual pay for a kindergarten teacher is $53,480 -- ranging from less than $34,000 to more than $78,000. This is higher than what the average preschool teacher makes, but slightly lower than that of elementary, middle and high school teachers.
So the aggregate pay for kindergarten teachers is about $8.5 billion.
For some historical context, Susan Moore Johnson, an education professor at Harvard University, said kindergarten teachers have traditionally been paid less than teachers at higher grade levels. But the implementation of district-wide pay scales has made pay mostly uniform across all grades within a district -- with exact salary varying based on experience and education, rather than the grade level. However, this is not the case in all districts.
Johnson added that, according to the National Center for Education Statistics, private school elementary teachers get paid, on average, several thousand dollars less than their public school counterparts.
So how does the $8.5 billion collective salary of America’s kindergarten teachers compare to the top-25 hedge fund managers’ take-home pay? This number is a little bit more elusive.
Hedge fund managers
In its 2015 ranking of the top-earning hedge fund managers, Institutional Investor’s Alpha magazine said the group of 25 collectively earned $11.62 billion in compensation.
At the top of the list is Citadel founder and CEO Kenneth Griffin, who earned an estimated $1.3 billion off his fund.
Lest your jaw remain fully hinged, 2014 was a bad year. The magazine called the total $11.62 billion bounty "paltry" compared to what it was in 2013, when the top-25 hedge managers made about twice as much -- $21.15 billion.
There are, however, some issues with measuring hedge manager salaries, though the experts we polled couldn’t name a source that would necessarily be more accurate than Alpha magazine’s list.
The magazine’s report is just an estimate -- based on the manager’s capital gains in the fund, as well as his (the top 25 are all men) estimated share in the firm’s management and performance fees charged to clients.
These numbers are hard to verify because no one really knows for certain a manager’s stake in his or her firm, said Nicole Boyson, a finance professor at Northeastern University.
Additionally, funds charged to clients vary drastically among and within the different firms, and one would also have to account for how much of these fees go toward running the business, rather than the salary, Boyson said.
"If you could get comfortable with the ‘right’ number for a hedge fund manager, which I am not sure is possible, then you could compare it directly to the gross pay of teachers ... with the caveat that these two groups are likely subject to different tax rates, etc.," Boyson said.
In any case, the best information we have shows 25 hedge managers making about $3 billion more than the country’s 158,000 kindergarten teachers combined -- and that’s in a bad year for the hedge managers. The data here isn't perfect, but the gap between the two professions is so wide that it seems a safe bet that hedge fund managers make more.
Clinton said, "The top-25 hedge fund managers (are) making more than all of America's kindergarten teachers combined."
Bureau of Labor Statistics data shows that America’s 158,000 kindergarten teachers together make $8.5 billion a year.
There are a few possible problems with the data for hedge fund managers’ earnings, but there’s no denying it’s significantly higher than a kindergarten teacher’s compensation. A rough estimate for the top-25 hedge fund managers shows they collectively earned $11.62 billion in 2014, and that was a bad year. In 2013, they earned approximately $21.15 billion. So using the smaller number, kindergarten teachers come up shy of hedge fund managers by about $3 billion, a huge margin.
We rate Clinton’s claim True.
Hillary Clinton’s Campaign Launch Speech, transcript, June 13, 2015
Institutional Investor’s Alpha, "The 2015 Rich List: The Highest Earning Hedge Fund Managers of the Past Year," May 5, 2015
Bureau of Labor Statistics, Occupational Employment Statistics: Kindergarten Teachers, March 25, 2015
Washington Post, "The top 25 hedge fund managers earn more than all kindergarten teachers in U.S. combined," May 12, 2015
New York Times, "For Top 25 Hedge Fund Managers, a Difficult 2014 Still Paid Well," May 5, 2015
Email interview, Clinton spokesman Josh Schwerin, June 14, 2015
Email interview, Northeastern finance professor Nicole Boyson, June 15, 2015
Email interview, Harvard education professor Susan Moore Johnson, June 15, 2015
Email interview, University of Chicago accounting professor Joseph Gerakos, June 15, 2015
Email interview, Brookings Institution senior fellow Matthew Chingos, June 15, 2015
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