Don Cayo: In my opinion

Fat cats: Latest study reveals they’re better educated and work longer hours than the rest of us and are likely to be CEOs, male and work in finance

Canada’s wealthy one percenters tend to be better educated and work longer hours than average people, a new study reveals.

The one-percenters — those rich folks who are envied and/or admired by some of the rest of us and vilified by many others — tend to be better educated and work harder than Jason or Jessica Average.

But their incomes are compounding far faster than ours and, judging from a thoughtful analysis of who and where they are and how they got to be there, they very possibly aren’t worth as much as they make.

In a perfect world — the one defenders of growing inequity in Canadians’ wealth might like you to think we live in — pay for top earners would be based on performance.

For example, say UBC economists Thomas Lemieux and Craig Riddell in a paper published recently by the Institute for Research on Public Policy, a well-designed compensation scheme for corporate executives — who figure prominently among Canada’s top one per cent of income earners — would be based on whether the firm does better than its competitors.

“If CEOs were paid in a way that serves the interests of shareholders,” Lemieux and Riddell say, “they would be rewarded based on their effort and performance, as opposed to factors like world oil prices, which are beyond their control.

“The fact that top incomes went up substantially (over the 30-year period of the study) in the oil and gas sector is consistent with a ‘skimming’ model of pay-setting, where top executives are able to capture some of the large rents created by higher oil prices.”

Of course, executives, who have a hand in setting their own compensation and can leverage their positions at the top of the heap to extract better pay and benefits, aren’t the only ones making top dollar — although the study finds they dominate the top one per cent. Some highly paid professionals such as medical doctors and engineers also make the list, although less frequently than in the past.

The fastest-growing sector when it comes to generating big paycheques is finance and insurance, which now employs 11 per cent of top earners. Both business services (at 19.2 per cent) and health and social services (at 13.3 per cent) are still bigger, but they aren’t growing as fast.

These are followed by manufacturing (7.7 per cent), mining/oil and gas (7.1 per cent), wholesale trade (7.0 per cent), government and education (6.6 per cent), construction (5.3 per cent), real estate (3.9 per cent), and retail trade (3.8 per cent).

The cutoff income level to make it into the top one per cent has increased about 33 per cent, if measured in constant dollars. In actual dollars, with inflation not factored in, this worked out to about $201,000 in 2011 — the census year the study draws on for its figures — and it’s about $213,000 today.

Over the 30-year period of the study, the average earnings of top earners versus other workers are even more telling. Using constant-dollar calculations, they are up 73.4 per cent for one-percenters, while the rest of us gained just 12.3 per cent.

Unsurprisingly, 80 per cent of one-percenters are men — although it may be noteworthy that this figure has shrunk from 92 per cent in 1981.

The one-percenters are more than twice as likely as the population at large to have at least a bachelor’s degree, and 10 to 20 times more likely (depending on their field) to have a graduate degree. And they work an average of 45.8 hours a week, with a substantial minority — 40 per cent — working 50-plus hours.

Finally, some bad news for readers who’d like to join this elite. The proportion of British Columbians who have managed to join the club has slipped over the years. In 1981, when this province had 10.8 per cent of the country’s population, we had 14.5 per cent of Canada’s top earners. Today, with 12.8 per cent of the population, our share of fat cats has dropped to 11.8 per cent.

Using constant-dollar calculations, (average earnings) are up 73.4 percent for one-percenters, while the rest of us gained just 12.3 percent.