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The rich really are getting richer Add to ...

The super rich are, in one respect, not that different from ordinary Canadians: they work for their money. It's just that they're rewarded at a rate most people only dream of.

The top 0.01 per cent of Canadian income earners, the 2,400 people who earn at least $1.85-million, aren't just basking in investment income and business profits. Nearly 75 per cent of their income comes from wages, just like the average Canadian, according to a new study from the Canadian Centre for Policy Alternatives. The top 1 per cent, the 246,000 Canadians who earn more than $169,000, receive about 67 per cent of their income in wages.

That's a change from the 1940s, when the rich took 45 per cent of their income from wages, 25 per cent from business profits and the rest from investments, dividends and interest.

"Those at the top actually work more for their money than any generation of the rich going back to the 1920s," said economist Armine Yalnizyan, the study's author.

Ms. Yalnizyan said the major trend she identifies is that the wealthiest Canadians are increasing their share of income at a historic pace. Looking back over the past 90 years, income is now concentrated in a way that hasn't been seen since the 1920s, she said. In the past decade, almost a third of income growth has gone to the richest 1 per cent, she added.

The big picture shows that after the Second World War, Canadian society distributed income in an increasingly level fashion. From 1946 to 1977, she writes, the income share of the richest 1 per cent fell from 14 per cent to 7.7 per cent. That trend was reversed over the past 30 years, as the top 1 per cent regained its 14-per-cent share of Canadian income. Over that time, the richest 0.1 per cent almost tripled their income share and the richest 0.01 per cent increased their share fivefold.

Median incomes, meanwhile, have been stagnant, according to Ms. Yalnizyan.

"You've always had these people who've got their fingers on something the rest of us don't. But why are they suddenly worth many multiples of what they were back then?" Ms. Yalnizyan said.

The answer, she said, is not economics. It's in our culture.

"As a society, we sanction it, by and large, for better and for worse," she said.

Economist Michael Veall, who teaches at McMaster University, said a few theories try to explain the income shift by focusing on changes in the labour market at the high end, particularly for managers. One view is that corporate governors have allowed CEO salaries to jump because they were climbing elsewhere. Another is that CEOs, known for being superb communicators, are more effective, and thus more valuable, in the digital age because e-mail and the mass media facilitate contact with employees and the public, Prof. Veall said. The same goes for athletes who are more valuable when they can perform for a TV audience of millions rather than a ticket-buying audience of several thousand, he added.

Ms. Yalnizyan said in the long run the trend toward income concentration seems, in her view, politically and economically unsustainable.

"You can't keep growing an underclass that plays by all the rules, gets a better education, works more and doesn't get ahead," she said.

 

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