One of my friends told me that the pay method in the US has been changing over the last decade. In the past, salary is the major portion of income, while bonus is just a small complement. Nowadays, bonus is getting more imporatnt as the source of income. This is particularly true. One survey shows that 2006 average bonus for a hedge fund portfolio manager is $2.5 million.
So, there are two questions in mind.
1. Since corporation now has a lower fixed cost relative to the past, does it mean that corporation is less likely to shut down, or getting easier to start up? If so, more competition is expected and a closer competitive outcome will be forseen.
2. Since bonus is a function of the company's profit, which to some extent, a function of the economy as a while. Good ecoomic year leads to a good bonus year, ehich leads to higher consumption? Do we have a life income hypothesis? or a Keynesian marginal propensity to consume?
Is lower business cycle volatilites in the past years an evidence of life income hypothesis?
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