I will say a little more, at risk of throwing gas on the fire.... what I'm about to say should be taken through the lense of my recollection from 35-40 years ago being foggier then hell, but my impression 35-40 years ago, was that I saw ski instructors skiing on the mountain that blew my mind at how good they were. Was that my impressionable mind or actually a fair observation? Back then equipment was a lot harder to ski on. And I saw guys in ski instructor jackets hauling ass with good form, even taking huge jumps, and other things that just blew my mind and made me want to be like them. Of course, back then I didn't know squat about it, so maybe my memory is completely foggy, but that was my impression, that ski instructors were more highly regarded for their skills, relative to the rest on the hill. To my little mind back then they were quite like ski gods actually.
Fast forward to today, new equipment does even the playing field a bit, but there is another wrinkle and this is where the gas is going to spike the fire. I think ski instructors themselves are also guilty of being somewhat laxidazical about their own improvement due to new equipment making everything easier. I think that not only has better equipment made it possible for non-instructors to keep up with instructors, but with few exceptions, instructors aren't trying as hard as they would have had to have tried 40 years ago, to be all that, or perhaps the new equipment prevents them from really needing to isolate and perfect certain movements, etc.. End result is that ski instructors today are simply not as amazing to watch, relative to the rest of the skiing public.
Ducking for cover now.....
Reasonable observation. Way back when, folks were paid comparatively well. $$$ attracts the best. No money attracts the passionate. On occassion, that's enough, but it certainly scews the pass percentages. There are a handful of large monied desitination resorts where im sure as a percentage the instructors are stronger skiers, but as a whole, i dont disagree with your observation. But the best instructors on our hill are all very good skiers.