Even though it makes perfect sense that IQ and money would be positively correlated, the idea has encountered enormous resistance, even among some people who believe intelligence tests are excellent measures of innate intelligence. There are several reasons for this backlash:
1) Intelligence and income are two of the most highly valued traits, so suggesting a correlation between the two can be taken quite personally given the enormous income inequality in America. It’s bad enough that income helps determine our quality of life and social status, but to have it reflect our intellect too seems unfair and makes people very jealous.
2) As income inequality continues to grow, so too does resentment for the super-rich, especially in a bad economy. People would prefer to demonize rich people for being greedy and unethical than credit them for being smart.
3) Even people with limited education can get rich. This is very upsetting to people who are not rich despite attending the best schools or obtaining advanced degrees. They were told that the were superior to less educated people and are deeply invested in the Ivy League caste system, so to see some high school dropout who mispronounces words make a hundred times more money than they do, generates enormous rage. The rage can only be placated by telling themselves that the gazillionaire, despite his financial superiority, is intellectually inferior; genetically inferior. Thus the correlation between IQ and income must be denied, or at least dismissed as a statistical artifact with no direct causal implications.
4) Many of the most valuable people in history were not especially rich. Suggesting money reflects income is upsetting to the fans of such people. Although many of us understand that correlations are general trends that often don’t say much about specific individuals, when the subject is as sensitive as IQ and money, emotion trumps rationality, making it easier to just dismiss the correlation outright.
It’s interesting to observe the cognitive dissonance that occurs when you show people evidence that IQ in fact enjoys a robust positive correlation with income (+0.4). Their first instinct is to say “well maybe low IQ predicts poverty, but there’s no evidence that high IQ causes above average income.” This rationalization is win-win for the typical liberal, because it allows them to feel smarter than all the minimal wage Republicans working at Walmart without feeling dumber than the rich who they despise.
What happens when you cite evidence showing the IQ-income correlation is more or less linear through virtually the full range of IQs and virtually the full range of incomes? Then the excuse becomes, correlation does not equal direct causation. In other words, IQ causes education, and education causes income, but IQ does not cause income directly. This excuse is a win-win for the Marxist Ivy League types because it allows them to feel smarter than less educated folks no matter how rich the latter are. For they didn’t make the money the “correct” way; by going through the Ivy League gate keepers.
Such thinking helps to preserve the Ivy League caste system that elitists love because it stigmatizes the high incomes of non-Ivy League graduates as being a result of only luck, hard work, and sociopathic opportunism and denies the “free market” credit for rewarding talent. Rather it is the Ivy League that rewards talent, and the “free market” only rewards talent to the extent it rewards Ivy League grads. Thus anyone who gets rich or powerful without jumping through Ivy League hoops gets stigmatized as an enemy of meritocracy who must be destroyed.
Claiming that the IQ-income correlation is entirely mediated by education is also used by anti-HBD folks to deny IQ tests measure real world intelligence. Instead, IQ tests are dismissed as only measuring narrow test taking skills that are useful for getting a degree, but it is the degree or the test scores that are rewarded by the “free market”, not the real world intelligent behavior of high IQ people. But what does the research show? Scholar Ruth Berkowitz looked into the correlation between LSAT scores (a proxy for IQ) and income among lawyers. She writes:
The regression results show that, across the top 50 schools, LSAT scores are significantly related to starting salary, even when controlling for the cost of living in the school’s location. One point on the LSAT is worth over $2,600 on the new scale…Of course, each point on the LSAT is not equal in terms of its effects on starting salary. At the high end of the scale, one point is worth much more than it is worth on the lower end of the scale. Without controlling for any other variables, a one point increase on the new scale on the LSAT (or a 1% increase at the mean) leads to a salary increase of $3,080 (8.5%) for the top 50 schools whereas a one point increase leads to only a $1,812 (6.2%) increase for all 177 schools combined… Similarly, moving up along percentiles on the LSAT distribution brings higher returns at the high end.
So among people with law degrees, LSAT scores and future incomes are substantially correlated. But of course, not all law degrees are equal. Do LSAT scores predict income among lawyers who attend the same law school? The answer is yes:
The regression results for the individual data show that there is a significant (at the 5% level), albeit a smaller relationship between LSAT scores and starting salaries than there is for the cross-school model. Among the students in one school, one point on the LSAT is worth only about one-seventh of what it is worth in the cross-school model. These results indicate that six-sevenths of the variance is being used up in the screening effects of the school. Law schools have the ability to put more energy into screening students than do law firms. Law firms assume that in general, students attend the highest quality school into which they were admitted. Therefore, the true effect of one point on the LSAT is greater than can be measured within one school. However, in terms of lifetime income, the spread is still a significant difference even within one school. A student with a higher LSAT score, should, on average, make more money than a student who scored lower and attended the same law school. Between schools, the spread is larger. If a student scored in the top 5% on her LSAT and went to a top 5% school, she would be earning a higher salary, on average, than if she attended a lower ranking school.
So before controlling for what law school one attended, each point on the LSAT is worth $2,600, however among lawyers who attended the same law school, each LSAT point is worth only one seventh of that, so I assume $371 per year. So, let’s say we have two lawyers who attended the exact same law school, John and Ted. Let’s assume John got an LSAT score of 180 (equivalent to 152 on the IQ scale) and Ted got a score of 150 (equivalent to 111 on the IQ scale). This would predict an income difference of $11,130 dollars a year, or nearly half a million dollars over a 40 year career. So in the typical case, there starting salaries would probably look something like this:
Same law school:
Ted LSAT IQ equivalent 111: $70,000 starting salary, life time earnings over $2.8 million
John LSAT equivalent IQ 152: $81,130 staring salary, life time earnings over $3.2 million
Now a nearly half million difference is huge, but it might seem kind of small considering the two men differ by 41 IQ points. However they only differ by 41 IQ points on the LSAT. Assuming the law school both men attended was average, if they were retested on the WAIS-IV, their IQs would regress to the mean IQ of lawyers nationally (IQ 125). Because of a statistical phenomenon known as range restriction, among lawyers, especially lawyers at the same law school, the LSAT probably only correlates about 0.3 with scores on the WAIS-IV. For example I found only a correlation of about 0.3 between self-reported LSAT scores and self-reported SAT scores, and others have a found a similar correlation between LSAT scores and Bar exam scores. A 0.3 correlation means that even though John was 41 IQ points smarter than Ted on the LSAT, he would likely be only 41(0.3) = 12 IQ points smarter than Ted on the WAIS-IV.
So the bottom line is that if you took the highest LSAT student and the lowest LSAT student at every law school, their WAIS-IV IQs would probably only differ by about a dozen points, and yet their life time earnings would differ by nearly half a million in today’s dollars. So even among people with identical schooling, even small differences in IQ are associated with huge differences in money:
Same law school:
Ted WAIS-IV IQ 121: $70,000 starting salary, life time earnings over $2.8 million
John WAIS-IV IQ 133: $81,130 staring salary, life time earnings over $3.2 million
Of course it should be noted that while a 12 point IQ gap is associated with a half million difference among people who attended the same school, the same 12 point IQ gap would be associated with a $3.1 million life time earning difference when schooling is not controlled:
Different law schools:
Ted WAIS-IV IQ 121: $70,000 starting salary, life time earnings over $2.8 million
John WAIS-IV IQ 133: $147,910 staring salary, life time earnings over $5.9 million
So while people like the Lion of the Blogosphere correctly assert that where you attend college is vastly more important to your income than how smart you are, being smart is still quite important in its own right.
Now in full disclosure, I should point out that another study found virtually no correlation between standardized test scores and income among graduates of the same business school. Ronald Yeaple of authoritative Forbes magazine reports:
Our survey of hundreds of MBA alumni found no correlation between an individual’s GMAT score and that person’s post-MBA success as measured by starting salary and pay over the first five years after graduation. In this study of individual graduates, the R-square = 0.0007, which means that there was no correlation between GMAT scores and post-MBA earnings. Similar studies in the past gave the same result. Based on this research, the GMAT appears to have no power for predicting an individual prospective MBA student’s future career success. Some of the most successful managers in our study had below-average GMAT scores, and vice versa.
The explanation for this is probably that a lot of rich people use their influence to get their unqualified children into business schools they don’t qualify for, and then those same dumb trust fund babies are given a high paying job in the family business they’re also not qualified for, and delegate their responsibilities to higher IQ employees. But in a field like law, where you actually have to interpret contracts and argue cases, it’s much harder for dumb rich kids to earn high incomes.