Janet Yellen, chair of the US Federal Reserve. Photo: AP
One of the first things you learn as a working adult is never ask each other's salary. Apart from the fact that it makes for an extremely awkward ice-breaker, it also inevitably breeds resentment. ("Why is so-and-so paid more than me when all they do is take two-hour lunch breaks and spam everyone with memes?")
But imagine this, if you will. Imagine being the head of one of the most important finanial institutions the the world, overseeing a $4 trillion balance sheet, being named Forbes' top 100 most powerful people of 2014 and then one morning, finding out that 113 of your employees are earning more than you. Significantly more.
That's pretty much what Federal Reserve Chair Janet Yellen discovered last Friday, when Reuters reported that her annual salary of $201,700 a year is around $45,000 below those of the top-earning employees's average wage at the US Fed Reserve.
According to reporters at Reuters, who obtained the data under a Freedom of Information Act request, the Fed's highest paid staffer is Inspector General Mark Bialek, who makes $312,000 per year. That is, $110,300 more than Yellen's pay pack.
The next highest paid employees are the central bank's four regional directors, the general counsel and chief operating officer, who each take home a base salary of $265,000.
But why the bizarre pay gap? Apparently it's because while Yellen's pay comes out of tax payers' pockets (that is, it's determined by the US Congress), her highest paid subordinates' aren't. That is to say, those huge pay packets are funded by the income that the Fed Reserve earns on securities it holds.
Okay. So that explains where they money comes from. But the real question is, why are those guys paid so much more?
Former Senator Ted Kaufman explained it to Reuters thusly: "It was important for the central bank to hire and retain talented staff who could fetch more in the private sector."
At this point, one might wonder why the same logic doesn't apply to attracting and retaining talent for the top job at the Fed. But perhaps another interesting question to ask is, of those 113 staffers who are better paid than Yellen -- whose salaries are supposedly dictated by merit and market forces -- how many of them are women? Unless it's an even split, the whole 'free market' argument doesn't quite explain it all, does it?