Correlates of higher income at age 29

I’ve long known, from my research with the General Social Survey, that happiness is correlated with higher income. This always seemed obvious because making more money and achieving higher status makes people happier.

But, according to a Wall Street Journal article, happiness also causes higher income based on a recent study that analyzes longitudinal survey data.

But I clicked the link to the PDF of the study, and discovered a very interesting regression analysis:

“Coefficients are standardized” means that the coefficients can be compared to each other to see the relative effect of each independent variable. To quote Wikipedia, “In statistics, standardized coefficients or beta coefficients are the estimates resulting from an analysis carried out on independent variables that have been standardized so that their variances are 1. Therefore, standardized coefficients refer to how many standard deviations a dependent variable will change, per standard deviation increase in the predictor variable. Standardization of the coefficient is usually done to answer the question of which of the independent variables have a greater effect on the dependent variable in a multiple regression analysis, when the variables are measured in different units of measurement (for example, income measured in dollars and family size measured in number of individuals).”

First of all, the low R-squared value shows us that the vast majority of differences in income are not being captured by these independent variables. And with only a single yes-no for college, this is not surprising. What does merely graduating from college tell us about the person’s future career track if we don’t know the quality of the college, or the major? Yet surprising, college is the single most important predictor of income of any other variable on the list. (The conventional wisdom that you should go to college to get higher income is correct.)

IQ is relatively unimportant. Self-esteem at the age of 16 is a better predictor of future income than IQ. And both height and “positive effect” (that means feelings of well-being and happiness independent of self-esteem) are equal in importance to IQ. Thus we see that “tiger mom” Amy Chua had it all wrong. If you want your children to be successful, you need to focus on their self-esteem and happiness, and not on their test scores and violin-playing abilities. Upper-middle-class white American parents understand that we live in a society that doesn’t reward a person’s inherent ability to create value.

While noting that IQ is as unimportant as it is, it is probably even less important for people who go to college, because low IQ is a better predictor of poverty than high IQ is a predictor of financial success. In fact, there is other evidence out there to suggest that, after educational credentials are accounted for and for those who have at least a college degree, higher IQ is actually correlated with lower income. (The corollary is that IQ is a useful predictor of income for people who do not have a college degree, because people without college degrees but with higher IQ are more likely to wind up in skilled blue-collar careers. For example, there are many civil service jobs that pay decent middle-class salaries which use g-loaded tests for hiring purposes.)