What role does intelligence play in earning potential?

The debate over the origin of intelligence in human beings is split into two approaches, the nature and the nurture. Nature approach argues that intelligence is an innate ability, and therefore is determined by our genes. Conversely the nurture side debates over environmental causes shaping the intelligence factor. Many longitudinal researches and observations provide evidence for both branches. Scarr and Weinberg (1976, 1983) have found that black children adopted from poor backgrounds and raised in western families of better income and educational level scored an average increase of 16 points on their IQ tests (more about IQ testing in the next section) than those who weren’t, providing evidence for the nurture approach. However, the measurements of IQ in subjects who stayed in non-western, poorer environmental conditions might not be correct, since it is not a culture free test. Lynn and Hampson (1986) have observed a world-wide rise in IQ over the last 50 years which accounts for improvement of environmental conditions over the period, although a particular relation between the environment change and IQ rise is not demonstrated, only suggested. Studies on selective breeding of “maze-dull” and “maze-bright” rats, Thompson (1952), Cooper and Zubek (1958), have demonstrated constant performance of every generation within each group, showing that intelligence was passed on with the genes. However, there are ethical issues within these researches and problems in generalizing the results to humans. All psychologists of the nature-nurture debate seem to agree that both genes and the environment shape the IQ quality. The EQ researchers also support that both factor play a role, as Elkhonon Goldberg, a professor of neurology at New York University School of Medicine, put it, “EQ develops through a combination of biological endowment and training.” Therefore intelligence in general would also be a combination of environment and biological preparedness.

How is Intelligence Quantified?

The intelligence factor is mostly measured through psychometric testing, especially the IQ. It is calculated through tests, such as IQ tests and AFQT (Armed Forces Qualification Test), which considered being more accurate. Both of them show how fast and logically can human brain perform particular tasks, giving the results in terms of IQ level. Tests of IQ are basic comparative evaluation method in educational areas, and are used for quantifying abilities to “provide feedback on performance and progress.” Therefore it is important that test methodology be reliable, valid and unbiased towards any specific social groups.

Tests of IQ have some flaws in their validity. First of all, tests claim to measure intelligence, however all concepts that make up this factor and extend of contribution of each one, are still not clear and are unknown. Many psychologists disagree over what contributes to intelligence, therefore the AFQT and IQ tests, instead of measuring intelligence, measure different portions of it. Another validity flaw would be that purpose of IQ tests and AFQT is known and it makes it possible for its takers to practice and prepare through similar tests, which would consequently disturb their IQ score. The test practice variable may differ between subjects, therefore interfere in accurate measurement of IQ and reduce the validity of the analysis. The tests do not equally account for all cognitive abilities, which are part of IQ, and can be related with some aspects more than others, again lessening their accuracy. The reliability of the measurement may not be fair. In order to prevent practicing, each IQ test or AFQT has to be made different from the others consequently it may as well be different in terms of difficulty level and consistency. The AFQT and IQ test are products of Western culture and do not account for any other diversity of cultures, where the intelligence concept might not have the same meaning as IQ is meant to measure, and therefore the test can be biased towards some ethnic groups more than others as Gould’s (1982) “Nation of Morons” research demonstrates. The bias might occur over different levels of educational experience of the subjects, like knowledge of English language, which might be required to answer the test questions. Even though, psychometric testing approach for quantifying the IQ level can have above limitations, it still provides an approximate measurement of cognitive intelligence.  

The emotional quality is far more difficult to calculate through psychometric testing, because of its innately subjective nature, and usually such tests depend on its author’s definition of emotional intelligence.  However, psychometric testing is also the only practical assessment for approximate value of people’s EQ. Most often, EQ is determined through Self-Report testing, such as Bar-On EQi tests, in which the subjects are asked to write a self-evaluation account. Its analysis provides insights into person’s personality traits and characteristics that determine the level of EQ. However, such way of testing is criticized for its validity, since self-report shows what the subjects think of their personality and therefore measures their self-image, and does not asses actual EQ skill and abilities.

The test that comes closest to real assessment of EQ would be MSCEIT, developed by Mayer, Salovey and Caruso (1990). It measures the ability of people to solve emotional tasks, instead of asking them to evaluate their performance themselves. The test consists of four matching, writing or multiple-choice components: the ability to identify emotions from various face expression pictures and abstract images; the ability to decide what emotions should one express in a given stimuli situations to generate the best solution; the ability to manage emotions by combining some of them to form another emotion, i.e. the subject might propose a combination of sadness and fatigue as components of depression; and the ability to have an awareness of personal emotions which arise from a given stimuli, either a situation or an image. 

However, MSCEIT has been criticized for reliability and validity flaws (Davies, Stankov, Roberts, 1998). It accounts for too many variables that can influence the true level of EQ, like current personal mood and disposition, or an environment were the test is taken. MSCEIT is not able to separate good and excellent levels of EQ. For example some sections, like identifying face expressions, are not very challenging and would not distinguish between normal and high EQ levels. The test is also too subjective, and depends too much on subject’s ethics, culture and beliefs. Even though, MSCEIT comes most accurately in measuring EQ and remain practical for use. As noted previously, intelligence is still mostly measured through psychometric testing like IQ tests, AFQT and MSCEIT tests, which give an approximate value of one’s intelligence.

What Roles does Intelligence play in Earning Potential?

As in previous sections, the essay will focus separately on each component of intelligence, in order to determine its effect on earning potential and then summarize the overall contribution of intelligence to influencing level of wages.

Various studies and researches, using scores of different data, have tested an extent to which measurable factors such as education and social, family background explain differences in people’s earnings. Most of their results are consistent with one another – the quantifiable factors, including IQ test scores, account for 30-40 percent of difference in economic success. This means that other 60-70 percent of differences are due to immeasurable factors such as family connections, personality, self-appearance and luck. If we take the IQ level out from the percentage of measurable factors, then out of all aspects it explains a little fraction in differences of the income. A careful analysis of correlation of earnings and IQ test levels, demonstrates that IQ accounts for as high as 10 percent of differences between earnings and as low as 4 percent. This means that at least 90 percent and at most 96 percent of career success is due to other factors apart from IQ. Another rough estimate of how much difference between earnings, IQ accounts for is 25 percent, which again leaves 75 percent or three forth of the job success to other causes. The studies on how much differences in earnings explain the scores of AFQT test, which also measure IQ, are consistent with the researches on IQ tests. Alone, AFQT scores explain about 15 percent of difference between hourly incomes. However, this does not mean that IQ level is insignificant in shaping of future earnings. These figures suggest that out of all factors determining them, IQ level alone is a small fraction and since as shown before, humans can control only about 40 percent of aspects related to influencing their income, IQ level plays a more important role then it seems to.

Studies that correlated directly IQ level alone to the level of individual’s earnings have found that on average “a person with an IQ of 115 will earn about 30 percent more than the average person with an IQ of 100.” This is a significant difference between only a 15 points of IQ. It demonstrates that people with higher IQ tend to earn more than the ones with lower. However, a close analysis of this research shows that the variation between the average figures is very high: “35 percent of people with 115 IQ will earn less than the average for the population as a whole.” This demonstrates that statistically IQ does have an effect on the earning potential, but practically its importance is still little. The statistics which show US average levels of IQ by state, also seem to support that on average, the higher the IQ the greater the earnings. However, as shown before, IQ level accounts for a small portion of the overall factors, therefore its affect on earnings can be seen as slight, but it still exists.

EQ factor, contradicting traditional thinking, is argued to have more influence on individual’s earnings then IQ, and more value then any other measurable factor. Since there isn’t a widespread scale by which the EQ level can be determined, statistics and researches of correlation between EQ and earnings are almost impossible to produce. A national (U.S.) analysis on what employers look for when they evaluate the potential workers demonstrates that technical and cognitive expertise is less important that ability to learn on the job and other EQ skills. Qualities listed included listening and oral communication skills, adaptability, personal management and other. As can be seen, even though these qualities do not take account of IQ and education, they are still part of EQ and therefore part of intelligence. This leads to, the more EQ an individual has, the more one is likely to get in a desired job, which is most cases would mean a better paid job. Therefore based on the labor market and the survey of what employers want, higher EQ would result in higher earnings.

Daniel Goleman, argues that EQ is used as a “new yardstick which is applied in choosing who will be hired and who will not, who will be let go and who retained, who passed over and who promoted” (1998). He states that the more EQ abilities one has, the better an individual will be able to motivate oneself and the more it’s likely that one will be successful on the job. Since EQ consists of emotional competencies, this “yardstick” can be applied in all kind of fields and jobs, making EQ a basic intelligence skill for any occupation. And because, based on Goleman, this skill determines who succeeds and who does not, the more EQ one has, the more chances there are for one to succeed and earn more, in any type or field of work.

As shown above, the IQ has a small contribution to the determination of one’s earning potential, which still accounts for an input. On the other hand, EQ is much more significant in controlling who gets a promotion and who will get fired, and serves as a good predictor of one’s earning potential. Both IQ and EQ are elements of intelligence, therefore when combined together, are excellent factor for predicting individual’s future income.

What Other Factors Affect Earning Potential?

Apart from intelligence, psychologists also take into consideration other factors which might influence the earning potential. Some of them, such as family or social backgrounds and luck factor, cannot be manipulated by one’s will, but still do contribute to career’s direction.

One’s social background is shown to have a slight but not negligible effect on education, employment and therefore on earnings. In a natural observation of a program that almost randomly assigned people in Chicago to live “either, in poor, inner city housing or in apartment in well-off suburbs,” it was later established that individuals who inhabited the suburbs were 25 percent more likely get a better job than those who moved to the city.  Also, their children were less likely to drop out of school and more likely to attend a college. This shows that one’s living conditions affect such things as employment, which obviously influences the amount of income, and education level, which also has an effect on earnings as shown by the statistics (see Appendix 1). Therefore, individual’s living location has a slight effect on income level potential, however, comparing to intelligence level it can be seen as unimportant.

The racial background of individual, in modern world, seems to have no influence on one’s earnings, even thought the early studies had shown that it has. O’Neill, Neal and Johnson (1990), analyzed the data from NLSY survey on wages of black and white men, have found considerable differences between their salaries of about 10 percent. However, their analysis did not distinguish between different family backgrounds of subjects, which might have affected the results, and therefore does not provide any reliable evidence. A more detailed research (Dickens, Kane, Schultze, 1995), that considered people’s different family backgrounds, have shown that average hourly income of black men are similar to hourly wage of white men, who have equivalent education, family status and background, and IQ test scores. This more reliable and valid study, suggests that there is no discrimination between racial background of individuals when considering their earning potential and that it does not play any role at predicting future wages. Although, this study have found racial preferences in admissions for elite colleges but none for all other institutions, which also supports that racial background, in Western societies does not affect the education level, therefore again supporting the fact that it does not have much influence on earning potential.

Another common known aspect that can affect the level of wages of individual would be the luck factor. However, because of its subjective, immeasurable nature, psychologists can only research this factor form case studies of individuals for whom it played an important role in determining the income. Still, obtaining any empirical researches and data based on luck is very challenging, since it represents a whole new different psychological area, not greatly related to earning potential therefore would not be taken in consideration by this paper.

So based on the researches of Chicago’s housing program, the individuals who live in the suburbs have more chances to earn more, since they are less likely to drop out of school and more likely to attend a college and be employed, as shown before. Also as Dickens, Kane, Schultze (1995) have demonstrated that people with equivalent family status and background, and IQ test scores but different in racial background have same chances to get employed or attend a desired college, which means that racial background in Western cultures does not affect one’s earnings. Luck, however was not considered because of its too subjective, immeasurable nature.

Conclusion:

Individual’s intelligence is an ability which consists of two main subsections: IQ which is responsible for cognitive abilities such as math, memory, reason, and EQ the ability to manage emotions of oneself and others for one’s benefit. Intelligence was demonstrated to be culture-dependent, since different societies define it differently and is supplied by both nature and nurture, as there is evidence for both approaches (Scarr and Weinberg 1976, 1983; Thompson 1952), however some of the nature supporting studies used animal subjects, since we cannot selectively breed human, and hence have ethical problems and their results cannot be generalized to humans. The concept of intelligence is very complex to measure it in its entirety, therefore it is mostly quantified by measuring IQ and EQ separately. IQ is calculated by IQ and by AFQT psychometric tests, which provide a digital IQ level. But these tests have flaws in their validity and reliability, since they have standardized methodology which allows test practice, and still questions may differ in terms of difficulty and consistency. The EQ quotient is determined through self-report testing which asks subjects to write a self-evaluation essay and through MSCEIT psychometric test. However, self-report testing does address one’s EQ skills, but provides insights into one’s personality. MSCEIT is far more accurate, but also has flaws in terms of reliability and validity, as it accounts for too many variables that can influence one’s EQ during a test taking time and depends too much on subject’s ethics, culture and beliefs. Even though, intelligence measurement tools have flaws in their methodology, they still have practical use and provide approximate values of one’s intelligence.

Since, intelligence and its quantity tools were defined, it made it possible to research its contribution to earning potential. IQ on its own has little influence on the future wages, its contribution was shown to be from 4 percent to 25 percent. However, studies do show that individuals with higher IQ tend to earn more, therefore IQ’s input is little, but not negligible. Based on researches of psychologists, EQ does influence one’s job status and looking at the surveys on what employers look for, EQ is a major factor that matters. Even though, other factors like living location also have little influence in prediction of one’s earning potential, while the social background factor was shown to have none. Since IQ and EQ both have influence on individual’s wages, combined together, they would be the major, measurable predictor of one’s earning potential - the more intelligence one has, the more income will be provided in the future.

For this research, it was very important to take into consideration immeasurable factors, such as luck. However, it was only possible to judge from case examples of individuals, a method that cannot be easily generalized to the rest of population and can be limiting in its accuracy, therefore it was not taken into consideration. The limitations were also produced by the studies on EQ factor, since it is very subjective and there is not a wide-used scale of EQ, like there is of IQ. This leads to the use of statistics and surveys of employers - the information, which is not relevant to psychological researches, and limiting to this essay. Therefore, for the development of this paper, it would be essential to be able study the contribution of luck factor on average individual and more objective methods of quantifying one’s EQ

Bibliography:

Dickens, William T., Thomas J. Kane, and Charles L. Schultze. “Does ‘The Bell Curve’ ring true?” Brookings Review 13.3 (Summer 1995): 18+. Questia Online Library. 26 Sept. 2004.

“Emotional Intelligence Tests.” EQ Information.  26 Sept. 2004 <http://eqi.org/eitests.htm>.

Fletcher, Teresa, and Melanie Richburg. “Emotional Intelligence: Directing a Child’s Emotional Education.” Child Study Journal 32.1 (2002): 31+. Questia Online Library. 4 Oct. 2004 <http://www.questia.com>.

Goleman, Daniel. Working with Emotional Intelligence. New Your, Toronto: Bantam Books, 1998.

Gosling, Mike. “Emotional Intelligence Testing & Reporting.” Goslings Pte Ltd.  26 Sept. 2004 <http://www.goslings.net/eitest.htm>.

Grabame, Hill. ALevel Psychology. Oxford: Oxford University Press, 2001.

Hunter, John E., and Frank L. Schmidt. “Employment testing: Old theories and new research findings.” American Psychologist 36 (1981).

“Leading by Feel.” Harvard Business Review (Jan. 2004): 31.

Mayer, John D., et al. “Measuring Emotional Intelligence with the MSCEIT V2.0.” Unpublished essay, 17 July 2001. 4 Oct. 2004 <http://research.yale.edu/heblab/pdf/Mayer.Salovey.Caruso.Sitarenios.MSCEIT.Emotion.2003.pdf>.

Sjoberg, Lennart, and Elisabeth Engelberg. “Measuring and Validating Emotional Intelligence as performance or Selfreport.” Working paper, 7 Feb. 2004. 26 Sept. 2004 <http://swoba.hhs.se/hastba/papers/hastba2004_003.pdf>.

Sloan, Van. “State IQ affects income more than politics.” Social Quotient® (SQ).  26 Sept. 2004 <http://www.sq.4mg.com/stateIQincome.htm>.

“Testing Emotional Intelligence.” Psychology Department: University of Toronto.  26 Sept. 2004 <http://www.psych.utoronto.ca/~reingold/courses/intelligence/cache/testing_ei.htm>.

Appendix 1:

---