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  • Rotman Management

    Finance Salaries, Returns-to-Talent and Inequality

    Jan 01, 2017 6 minutes
    Interview by Karen Christensen

    FACULTY FOCUS Claire Celerier, Professor of Finance, Rotman School of Management

    Many people believe that the finance sector is contributing disproportionately to income inequality in our society. Do you agree?

    I do. Ever since the 1980s, compensation in finance has been higher and more skewed than in other sectors. It has been shown that the ‘finance wage premium’ — the degree to which finance salaries exceed those in other industries — is, on average, 50 per cent. That is why the sector has been criticized as one of the sources of growing income inequality.

    My colleagues and I felt that this public debate called for an improved understanding of the of bankers’ pay. Our intuition told us that one of the key drivers is . For our research, we defined talent as, ‘the aptitude to reach an objective in a competitive environment’. In this definition, talent encompasses not only cognitive skills, but also personality traits such as motivation, self-discipline, low cost

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