Many pay rows are as much about recognition as money. Goldman Sachs has conspicuously declined to pay junior bankers higher salaries. The bust-up pits the expectations of middle-aged bosses against those of young trainees. Should equity, in its broadest sense, be deferred or paid now?

An anonymous memo written by trainees earlier this year detailed the indignities of churning out pitchbooks 24/7 from home amid a pandemic. Soon the travails of bantam bankers across Wall Street poured on to social media. Their isolated toil was supporting record-breaking deal flow and hefty profits.

Some investment banks have responded with more perks and a base salary increase for graduates. The typical annual rate for juniors has risen from $85,000 to $100,000. Goldman, run by tough chief executive David Solomon, is a notable holdout.

But the bank is unlikely to let any pay gap with rivals widen. It can use year-end bonuses to make up for any base salary shortfalls. Still, its willingness to keep essential gears in its moneymaking machine spinning without extra financial lubrication is short-sighted.

The bank has long remunerated employees partly in prestige. The same recruitment model operates at other famous brands, ranging from fashion magazines to the UK’s Treasury department. The bet is that staff — particularly the junior kind — can cash in via a better-paid job at a lesser-known employer after a few years if they wish. At Goldman, leavers typically switch to the buy side.

The business remains the top franchise in investment banking. Its overall annualised return on equity of 31 per cent in the first quarter was its highest in years, after a rocky period. Reluctance to raise junior salaries sends the message that the franchise matters more than individuals. Working intensely for pay at the low end of industry averages is seen as a rite as passage by older bankers.

The question is whether the current generation thinks differently enough for other employers to create competitive advantage. Banks such as Citigroup are touting their flexibility on workplace attendance. Boutiques such as Centerview and Evercore can match Goldman in terms of private equity and hedge fund placement.

Last year Goldman Sachs spent $13bn on total compensation. If it has 1,000 analysts, a $15,000 bump costs just $15m. Making future talent feel it is valued surely has a return on investment higher than that.

The Lex team is interested in hearing more from readers. Please tell us what you think of the row over junior banker’s pay in the comments section below.