Who’s Canada’s top 1%? It may not be you

Over the last three decades, the rich have gotten richer in Canada, with individual income inequality growing by 16%, says a new paper released by the Department of Economics at the University of British Columbia.

Looking at household incomes across Canada, families are now more closely matched when it comes to pre-tax income, but disposable income inequality rose from 40% in 1980 to 44% in 2009.

Individuals, however, have seen the greatest increase in pay inequality. Approximately 8% of the total income in Canada was held by 1% of the population in the late 1970s. Their share has since doubled, now up 7% to 14%.

“Those in the top 1 % have incomes fourteen times larger than the average Canadian,” says the paper. “Such an uneven distribution of income hasn’t been seen since the Great Depression [in the 1930s], when it reached an all time high of 18%.”

One of the major factors pushing this trend is the recession and the current economic downturn.

“Inequality rises sharply during recessions because it’s low-income earners who bear the brunt of bad economic times,” says the paper, entitled Canadian Inequality: Recent Development and Policy Options “This happened in both the busts of 1981-83 and the early 90s.”

The paper also suggests, “Inequality is then expected to decline as we come out of recessions, but this didn’t happen in either the 80s or 90s. Instead the level of inequality ratcheted upward over time as minimum wage increases stalled.”

The one silver lining in the group’s report is minimum wages has actually increased since the mid-2000s—having seen a major push in 2008 across the country, except in British Columbia—and have resulted in large increases in real wages for both men and women at the low end of the pay scale. Hopefully, as the recession comes to an end, wage adjustments will help smooth out pay inequality.

Based on the substantial increase in wage inequality, though, it’s no surprise that low earners took to the streets, occupying Wall Street and Bay Street, and calling for higher taxes on the rich.

Read: Occupation coming to Bay Street

But, who makes up the 1%? Who are these mysterious top earners?

Despite protestors’ cries of injustice, the paper reveals “there are just not enough investment bankers and high-flying stock brokers to fill the ranks of the some 275,000 well-off Canadians—1 % of Canada’s adult population of 27.5 million.”

A mere 10 % work in the finance and insurance industry, 14% are senior managers and CEOs, and another 10 % are physicians, dentists and veterinarians. As for the rest, it’s anyone’s guess. The report says, “Top income earners are such a diverse group of individuals that it’s hard to come up with a simple explanation for their growing incomes.”

Read: Deconstructing Wealth

A tax on the rich, then, wouldn’t target only top executives or financial professionals. It would affect a broad group of workers across many fields and sectors, and can’t be contributed to one specific group of employees.

While the report doesn’t point out who specifically makes up the rest of the 1%, it did pinpoint some characteristics of top earners in Canada. Read on to find out what it takes to join the ranks of Canada’s elite.

A new paper released by the Department of Economics at the University of British Columbia says the rich have gotten richer in Canada, with individual income inequality growing by 16%. And while the majority (66%) aren’t financial professionals, check out below to see what it takes to be one of the wealthiest Canadians:

• You need to earn an average income of $450,000. The average for the whole population is $36,000, and those in the top 1% earn at least $230,000.

• You need an education. Due to technological advancements and stiff competition, to name a few factors, post-secondary schooling does more than help you get a foot in the door. While only 19% of the population holds a degree, over 58% of individuals in the top 1 % have at least a bachelor.

• You have to work long hours. The majority of top earners work more than 50 hours per week.

• You’re most likely a man. The paper calls the group of top income earners the “brotherhood of top incomes”; the vast majority (83%) of top earners are men.

“Despite the significant gains women have secured over the past few decades, they remain dramatically underrepresented at the very top of the income distribution,” it states. This is also true of the financial sector as a whole, with only 20% of CFAs in Canada, and only 19% globally, being women.

Read: Republicans vote against equal pay

• Experience and tenure are major factors. Young people under 35 are severely underrepresented in the top income group. The study suggests these workers “may just be a transitory phenomena who haven’t yet reach their peak life-cycle earnings.”

Yet, researchers did look at the divide between older and younger generations in the workplace, especially given the current age crisis Canada’s facing. They found younger employees are facing worse earnings prospects, while higher tenure and older workers continue to maintain real wages over time.

Read: Gen Y need to live below their means: RBC

Additionally, “Canadian corporations have little choice but to pay higher and higher salaries to keep their “top players”, who would otherwise be lured away by the ever growing salaries south of the border.” These top players are often older workers with more experience, while younger employees receive fewer raises and get paid less over time.

Technological advancements have furthered this trend; many computer systems can now handle many routine tasks, erasing the need to hire juvenile workers to perform easier jobs. And extremely skilled workers are needed to run the programs. There’s no middle ground and no room for basic jobs that can be efficiently handled by technology.

Along with pay prospects, job prospects are becoming scarce. Young prospective staff may seek employment in lower paying sectors rather than in their preferred field. This further contributes to the divide in pay equity between generations and individuals.

Read: Insurance industry needs young blood