Finance is considered to be one of the most stressful industries to work in. Pressure to deliver consistently compelling results affects the work-life balance of bankers by inducing them to work long hours. A group of junior analysts working at the leading investment bank Goldman Sachs had recently raised their concerns about excessive workload, which gained substantial attention from mainstream financial media. The Financial Times explained how this forced a management response promising stricter enforcement of an existing ban on requiring junior bankers to work on Saturdays but also, paradoxically, asking staff to “go the extra mile for our client, even when we feel that we’re reaching our limit.”
This is not the first time long working hours in the finance industry make headlines. The tragic demise of Moritz Erhard, a 21-year London City intern who died after working for three days without sleep, brought to light the gruelling working hours in investment banks and garnered media criticism. As a response, during late 2013 and early 2014 and within a few months from this shock, most investment banks established “protected-weekend” policies aiming at improving the work-life balance of junior bankers by guaranteeing them free time during weekends, in particular on Saturdays. However, whether such policies improve the work and life balance of junior bankers is not clear.
Still going the extra mile
This is why with Hong Kong University of Science & Technology professor Deniz Okat, we decided to study changes in banks’ long-hour culture by evaluating how these policies affected bankers’ working hours, and whether they meet their good intentions by encouraging junior bankers to cut them. In order to do so, we analysed information from 16 million taxi rides from ten large New York City investment banks and their immediate surroundings to residential destinations. We used records of over one billion yellow medallion taxi rides released by the New York City Taxi and Limousine Commission and made available on their website, including the GPS coordinates of the pick-up and drop-off locations and the timestamps for the pick-ups which are available for each ride from January 2009 to June 2016. I think the difficult task with the data was to crunch the numbers – billions of taxi rides in all – and to design a reasonable research question: since there is too much noise in the data, it requires filtering. I think that’s why there are few researchers using it. Otherwise, it is super interesting data to study the life of New Yorkers.
“It is difficult to change bank culture by decree”
Published a few days ago as a working paper and already mentioned by Bloomberg, the Financial Times and The New York Times, our analysis shows that when the banks implemented no-Saturday work policies, it induced employees to work late-night hours on weekdays to compensate. These results are stronger during the summer internship weeks, when investment banks employ large numbers of students eager to prove themselves by working hard. Thus, the negative effects of the policy may have had the largest effects on the most vulnerable employees the policies were supposed to protect. This is informative of the nature of bank culture and the extent to which banks can change it by introducing new policies, showing even well-meaning ones can have unintended consequences. Moreover, it speaks of the persistence of the long-hour culture in high-skill professions, in particular in finance.
Our results suggest it is difficult to change bank culture by decree, in particular when the stakes for the junior employees and their bosses are high. Apart from being concerned about their status in the career tournament (a model that treats careers as single-elimination sports competitions), their bosses’ pay likely depends much more on the productivity of their team than that of their subordinates. Even if longer hours generate only a modest productivity increase for the team, the large stakes involved may give bosses a strong incentive to push their subordinates to work harder…
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