Higher intelligence causes lower income (for people with bachelor's degrees), part III

I previously explained that intelligence is not very highly correlated with income. Based on analysis of the General Social Survey, using educational degree, age, and score on the Wordsum vocabulary test as a proxy for intelligence, I concluded that one’s educational degree is far more important than intelligence when it comes to predicting income, and there even seemed to be some mysterious evidence that high IQ might cause lower income.

This week I decided to analyze the data in a different way, restricting the analysis to respondents with the same highest level of educational attainment.

Here is the shocking conclusion: in the recent years of the GSS (1991 to 2004), for people whose highest level of educational attainment is a bachelor’s degree, there is a negative correlation between intelligence and income. In the 1998 to 2004 data, each point higher on the Wordsum test causes a $1,200 decrease in income.

This trend seems to be increasing with time. Before 1991, there is a slight positive correlation and each point higher on the Wordsum test causes a $500 increase in income.

From 1991 to 1996 we observe the negative correlation, and each point higher on the Wordsum test causes a $700 decrease in income.

This negative correlation only exists for people who have a bachelor’s degree as their highest level of educational attainment. For respondents whose highest degree is high school, there is a very solid positive correlation. In the 1998 to 2004 data, each point higher on the Wordsum test causes a $1700 increase in income. This is not something to get too excited about. There’s a vast difference in ability between someone in the top 5% (Wordsum 10) and someone below the median (Wordsum 5), yet using the figure above the smart person only earns an extra $8,500 per year. This amount corresponds 31% of the median income of $27,500.

There is also a positive correlation for respondents with a graduate degree. In the 1998 to 2004 data, each point higher on the Wordsum test causes a $1,400 increase in income. Because there are only 167 cases in this regression, the t-statistic is only 0.726, so this is a weak correlation. Because the median income for respondents with a graduate degree is $55,000, a five point difference on the Wordsum test corresponds to only 13% of the median income.

So what’s my explanation for all this?

It’s easy enough to explain why people with only high school diplomas earn more if they have a higher score on the Wordsum test. They are being paid slightly more for their higher level of ability. For example, they are more likely to end up in skilled blue collar professions which earn decent salaries.

But why is there a negative correlation for people with only bachelor’s degrees? The obvious conclusion is that what a person majors in at college is far more important in determining future income than how smart the person is. We can also conclude that as intelligence increases, a student is more likely to choose a less financially rewarding major.

This makes sense if you think about it. People of average intelligence who attend college are only attending for the practical benefits of a better career. People of average intelligence don’t appreciate college as a learning experience.

People with higher intelligence enjoy learning, and because of this they may choose a major that seems intellectually interesting (like Roman History or 19th Century English Literature) yet has no practical use.

This negative correlation surely indicates that young people are getting bad career advice from their parents and schools. If there was an efficient system for sorting young people into appropriate majors, surely the more intelligent students would be directed towards fields where their intelligence would most benefit society.

Finally, let’s explain the positive correlation for people who have a graduate degree. In this case, I suspect that higher intelligence predicts a more economically useful major. Specifically, a large percentage of graduate degrees are given to school teachers, because many states either require or strongly encourage their school teachers to get graduate degrees in education. It is well known that school teachers have lower SAT scores (and thus lower intelligence) than other college majors. Respondents with a higher Wordsum score are less likely to be a school teacher, and this explains the very small positive correlation between Wordsum and income.

The final conclusion is that choice of college major and graduate program are the major determinants of future income. Intelligence is only important to the extent that, as intelligence decreases, the universe of educational programs that the student is capable of completing becomes smaller.

Comments

[Turkey]

It may also be that all of the "smart, but not driven" personality types naturally tend to pool at the bachelor's degree level. For a smart, lazy kid, getting a bachelor's is much easier and less scary than joining the work force at eighteen, but the subject GREs for grad school are the first tests smart kids will run into that they can't walk over just by being smart - because they're largely a combination of specific knowlege and jargon absorption, you have to have really, really cared about your major. Plus, unless you've won over a mentor or two as an undergrad (probably not exclusively a matter of intelligence) you're going to be in limbo. So, they slink out and get a mediocre white collar job and live in mediocre apartments.

[The Superfluous Man]

Isn't every engineering department brimming with smart people set to make (on average) $50k+ upon graduation? Quite a large exception.

Doesn't the presence of women in the sample skew the result? Is the result much different if they are left out?

[Half Sigma]

Engineering departments are brimming with people full of above average math skills, but this doesn't necessarily make them "smart."

The GSS only has a vocabulary test.

[JewishAtheist]

This negative correlation surely indicates that young people are getting bad career advice from their parents and schools.

Unless money isn't everything.

[Half Sigma]

Or, Jewish Atheist, maybe it's the Iron Law of Wages again. People with higher Wordsum scores are more likely to have affluent parents, so they NEED less money (because they are getting parental support).

[SFG]

How large are the sample sizes? If my smart friend Fred is making less money than my dumb friend Bob, that doesn't prove anything.

The problem with any survey data is that if you slice the pie too thin, you don't get significant results.

[superdestroyer]

You should look at the top ten majors in college. http://www.princetonreview.com/college/research/articles/majors/popular.asp.

I wonder how many smart people (good language test scores) are on this list.

[spungen]

"People with higher Wordsum scores are more likely to have affluent parents, so they NEED less money"

HS, my guess would be that the higher-scoring bachelor's holders actually have *less* affluent parents. They are more likely to have gone to college *only* because they were smart. The lower-scoring ones are more likely to have gone because because of support/pressure from well-off families and communities. The latter tend to make more money because their family and friends have money.

Also, the higher-scoring people from lower-class families might be, on average, less attractive and socially skilled than their high-scoring peers without a bachelor's. It makes sense that the former would earn less. They had to go to college as kind of a last resort, because they weren't a good fit for the non-college moneymaking jobs involving charm or physical strength.

[The Superfluous Man]

Don't have much time to respond right now, but I think you're underestimating engineers - see this: http://members.shaw.ca/delajara/Occupations.html
(It's not perfect, I'll try and find something more appropiate later.)

[James Bowery]

For what its worth, I recall my roommate at the University of Iowa, who majored in psychology, reporting that higher intelligence in that school predicted higher academic achievement in graduate school but lower academic achievement in undergraduate school.

This was over 30 years ago so my memory may be a bit sketchy but I think it is very important to find areas where IQ correlates unexpectedly.

[James Bowery]

Erratum: Higher IQ predicted higher undergraduate performance up to a point (I don't recall how high the IQ was for optimum undergrad performance) and then predicted lower academic performance for very high IQs.

(I warned you my memory of this ancient history was sketchy.)

[Douglas Knight]

SFG,
I wouldn't worry about sample size because Half Sigma is looking at correlation coefficients. I would worry about data mining: for every 20 coefficients HS produces, one should be spuriously at the 95% confidence level. A common failure mode is to keep trying different restrictions until you get the result you want.

Half Sigma,
Your reminder that this is a vocabulary test is very important. It makes your explanation that this is about choice of major much more plausible.

[The Superfluous Man]

HS, some data that suggests you are incorrect:
http://www2.gsu.edu/~wwwphl/philosophy/undergraduate/PhilosophyMajor.html
http://165.224.221.98/programs/digest/d05/tables/dt05_128.asp

The optimal data is the average score of each major after graduation. I couldn't find it, but did find of each major on post-graduation tests like the GRE and the GMAC and the average SAT score of the intended ____ major (say classics). The tendency is that physics majors score highest, followed by mathematics, and then economics, engineering and philosophy (hard to tell which wins, as the data differs by measure). There is surely all kinds of selection bias, that shift the data to either support or weaken my point (eg, a deflated score for engineers from the latter, as it is only intended major, so the dumb have not been screened out), but little evidence for HS's stance that the smarter "choose a major that seems intellectually interesting yet has no practical use. " I think you're either squinting so hard that you are seeing things that aren't, or more likely, drawing conclusions from GSS and then not researching the more specific data pertaining to those conclusions, as I have. I'm a bit baffled myself; any reason I could give currently lacks evidence.

Mathematics graduates actually have decent salaries, more than econ majors but less than engineers I've found, but I can't find a good study. Physics grads earn about as much as engineers or a bit less I believe.

[Half Sigma]

Superfluous, such a tiny percentage of college students major in philosophy or physics that the effect (whether up or down) would not register on the GSS which is a broad sample of average Americans and not of those who went to elite schools.

People majoring in "Health and allied" services have a lower verbal SAT score than most majors, but it probably pays above the median salary in the GSS which isn't really that high.

[secret asian man]

This isn't corrected for major. That's probably why.

Some anecdotes:

Most people I know who found lucrative jobs out of college never bothered for grad school. Most people I know in grad school majored in something unprofitable and are usually in grad school for something equally unprofitable.

Education may be used to make up for the inherent unprofitability of the field.

Corrected for major, this would likely come out totally differently.

Someone who gets a higher degree in a subject is likely to earn more than someone with a lower degreee in the same subject.

[matt]

it would be nice if this post had links to part II and part I.

[matt]

err, wait it does. i'm sorry; you can delete my comments ;)

[leemanimal]

Well, I have experienced this correlation on a personal level. I haven't taken the Wordsum test, but did take the WISC III in college as part of a research study. I tested at 139. ACT=32. GMAT=630. I was born into poverty...single mom, welfare, etc. I started out as an accounting major for pragmatic reasons. I knew I would be more employable as well as make a decent income. I changed my major to philosophy, and theN to psychology. I graduated in 5 years with a 3.6 GPA, while working full time. I worked eight years in social work for menial wages and very little respect. Four years into my fruitless career I began graduate school. I now have two Master's degrees, one in Accounting and the other in Finance. I've doubled my income in a year and a half, and have been promoted twice. I would say the correlation is substantiated in my case.

[Steve]

Yes I've found this to be true in many circumstances, especially if you don't attend a prestigious big name university. At least if you go to a school with a reputation you can rely on that. Employers from I-Banks hire people from Harvard, Yale no matter what their major. Because they assume that person is intelligent. If your like me I had a 1300 SAT and went to a large public school because I saved a lot of money that way... however I majored in international policy and minored in business economics. Woke up about a year before I graduated and realized I was going to be slumming it with all the other morons that the United States educational policy herded into college. Oh well wish I had applied to NYU or Cornell now, or at least majored in pre-med or engineering.

Steve I am like you lol, I had 1580 SAT's, and could have gone to MIT or Harvard, but went to public school instead. Set to make $90k my first year out. In the end if you are smart enough, and driven enough, and an engineer :), you will do well.