Incompetent and Overpaid

Floyd Norris, writing in NYT, finally confirms something that I have long held to be an obvious truth - financial sector workers are overpaid. See for yourself:

"Wages in finance were excessively high around 1930 and from the mid 1990s until 2006," wrote Thomas Philippon of New York University and Ariell Reshef of the University of Virginia, in a National Bureau of Economic Research working paper released this week, "Wages and Human Capital in the U.S. Financial Industry, 1909-2006."

They forecast that up to half the wage differential observed in recent years "can be expected to disappear."

The article goes to discuss much more. And you should read it in full.

I should explain why I included the word "incompetent" in the title. This is not to say that all financial sector employees are incompetent (just as they may not all be overpaid). However, it is quite well-known that any booming economic sector attracts a lot of wannabe-types who would not be in that sector if not for the boom. Remember the dot-com bubble, and how many incompetent idiots it attracted to the sector? This one has been the same.