Since intelligence can be defined as the cognitive ability to adapt (to turn situations to your advantage; problem solve), it’s only natural that IQ and money should be correlated. For what could be more adaptive in a capitalist society than getting rich? On the other hand, there’s a lot more involved in making money than just IQ. Hard work, ambition, family connections, greed, luck, looks, health, personality, ruthlessness and special talents can all also play important roles. Thus while there’s reason to expect IQ and income to be correlated, the correlation should be modest given all the other factors. Indeed only about 16% of the variation in income can be explained by IQ.
But even small correlations can have big effects at the extremes. At the poorest extreme you have the homeless. For example, a 1986 study of homelessness in Chicago found that panhandling income averaged $7.00 per month. Adjusted for inflation (that study is 28 years old) that’s $15.14 a month or about $182 a year (a three figure income).
Meanwhile, a study of 90 Milwaukee homeless men found they had an average IQ of about 84 on an abbreviated version of the Wechsler Adult Intelligence Scale. In other words, Americans at the bottom of the economic ladder (those earning three figures a year) average IQ 84. By contrast the median American earns five figures a year and by definition has an average IQ of 100. Extrapolating from these two data points, one can estimate that average IQ increases by 8 points for each figure of individual income. In other words:
Three figure income (i.e. homeless): Average IQ 84
Four figure income (i.e. part-time minimum wage worker): Average IQ 92
Five figure income (i.e. middle class): Average IQ 100
Six figure income (i.e. potential self-made millionaire): Average IQ 108
Seven figure income (i.e. potential self-made decamillionaire): Average IQ 116
Eight figure income (i.e. potential self-made centimillionaire): Average IQ 124
Nine figure income (i.e. potential self-made billionaire): Average IQ 132
Ten figure income (i.e. potential self-made decabillionaire): Average IQ 140
Note: these are individual incomes, not household incomes.
Some people may question the wisdom of extrapolating IQ differences between the middle class and the homeless all the way up to the highest levels of income. For example, the Lion of the Blogosphere argues that IQ is a better predictor of poverty than it is of wealth. However the linear extrapolation seems to yield valid results. For example, based on their academic credentials, scholar Jonathan Wai estimates that 45% of billionaires have IQ’s in the top 1% of America (IQ 135) which implies the typical billionaire has an IQ somewhere in the low 130s. Since billionaires have ten figure net worths, it seems reasonable to assume they have roughly nine figure incomes (since earning hundreds of millions a year, should eventually translate into amassing over a billion) and my model estimates that nine figure earners should average IQ 132. U.S. presidents resemble billionaires or nine figure income earners, because although presidents have “only” a six figure income, their lifestyle of living in a colossal mansion with servants, secret service protection, stratospheric power and flying by private jet, resembles the life of a billionaire. Evidence suggests U.S. presidents also average IQ’s in the low 130s.
The only people who may rank higher than U.S. presidents, nine figure earners, and most billionaires, are people who earn ten figures a year. These are people who amass eleven figure net worths (in other words, the self-made decabillionaires). It may seem outrageous to suggest that even the highest economic class has an average IQ as extreme as 140 (above the 99.5%ile of Americans) but this level of self-made financial success is dominated by people like Bill Gates, Mark Zuckerberg, the Google co-founders…in other words, math and technology types, often from extremely prestigious universities.