Elsevier

Labour Economics

Volume 51, April 2018, Pages 170-183
Labour Economics

Personality, IQ, and lifetime earnings

https://doi.org/10.1016/j.labeco.2017.12.004Get rights and content

Highlights

  • This paper estimates the effects of personality traits and IQ on lifetime earnings, both as a sum and individually by age.

  • The payoffs to personality traits display a concave life-cycle pattern, with the largest effects between the ages of 40 and 60.

  • The largest effects on earnings are found for Conscientiousness, Extraversion, and Agreeableness (negative).

  • An interaction of traits with education reveals that personality matters most for highly educated men.

  • The overall effect of Conscientiousness operates partly through education, which also has significant returns.

Abstract

This paper estimates the effects of personality traits and IQ on lifetime earnings of the men and women of the Terman study, a high-IQ U.S. sample. Age-by-age earnings profiles allow a study of when personality traits affect earnings most, and for whom the effects are strongest. I document a concave life-cycle pattern in the payoffs to personality traits, with the largest effects between the ages of 40 and 60. An interaction of traits with education reveals that personality matters most for highly educated men. The largest effects are found for Conscientiousness, Extraversion, and Agreeableness (negative), where Conscientiousness operates partly through education, which also has significant returns.

Section snippets

The Terman survey

The Terman survey was initiated by the prominent psychologist Lewis Terman to study the life outcomes of high IQ children. His team canvassed all schools in California, grades 1–8, in 1921–1922, to enrol children who scored in the top 0.5% of the IQ distribution. The sample consists of 856 boys and 672 girls, born around 1910, and who were followed until 1991, with surveys every 5–10 years.2

The overall association of personality traits and IQ with lifetime earnings

The first order of business must be to establish the overall association of personality traits with lifetime earnings in Terman, conditioning on baseline covariates. This overall association would be comprised of both direct effects of these traits on wages, as well as any intermediate outcomes of traits that also drive earnings. Examples of such intermediate outcomes are working hours, health, retirement age, and education. Education plays a particular role in the literature, therefore it will

Conditional effects of personality traits and IQ, men

So far, I have presented the overall association of traits with earnings, comprising numerous potential channels. As mentioned, one channel stands out in importance: education. There is pervasive evidence that more conscientious individuals have higher educational attainment (Noftle, Robins, 2007, O’Connor, Paunonen, 2007). Piatek and Pinger (2016) argue that for Locus of Control, another facet of personality, the largest wage effects are indeed due to its effect on educational attainment.

Conditional effects of personality traits and IQ, women

After studying when and for whom personality traits matter most in terms of lifetime earnings for men, this section briefly completes the analysis for women. The direct analogy is challenged by the historical nature of the Terman sample, which is more visible for women than for men of this cohort. The women belonged to a generation in which their role was still mainly that of a homemaker, mother, and wife. A woman’s freedom to choose a career or define her lifestyle was not what it is today.

Summary and conclusion

This paper estimates the effects of personality traits and IQ on lifetime earnings of the men and women of the Terman study. The traits of Conscientiousness and Extraversion have strong, positive associations with men's lifetime earnings, and Agreeableness a negative association. While the Terman sample is selective in terms of IQ, these results mirror prior findings that are based on representative samples. They show that even men with exceptional cognitive skills benefit from socio-emotional

References (102)

  • B.W. Roberts et al.

    The kids are alright: growth and stability in personality development from adolescence to adulthood

    J. Pers. Soc. Psychol.

    (2001)
  • B.W. Roberts et al.

    The rank-order consistency of personality traits from childhood to old age: a auantitative review of longitudinal studies

    Psychol. Bull.

    (2000)
  • B.W. Roberts et al.

    Patterns of mean-level change in personality traits across the life course: a meta-analysis of longitudinal studies.

    Psychol. Bull.

    (2006)
  • Savelyev, P. A., Tan, K. K. T., 2015. Socioemotional Skills, Education, and Health-Related Outcomes of High-Ability...
  • J.G. Altonji et al.

    Employer learning and statistical discrimination

    Q. J. Econ.

    (2001)
  • American Psychological Association

    APA Dictionary of Psychology

    (2007)
  • J.D. Angrist et al.

    Does compulsory school attendance affect schooling and earnings?

    Q. J. Econ.

    (1991)
  • M.R. Barrick et al.

    The big five personality dimensions and job performance: a meta-analysis

    Pers. Psychol.

    (1991)
  • M. Bartlett

    The statistical conception of mental factors

    Br. J. Psychol.

    (1937)
  • G.S. Becker et al.

    Education and the distribution of earnings

    Am. Econ. Rev.

    (1966)
  • G.S. Becker et al.

    An economic analysis of marital instability

    J. Polit. Econ.

    (1977)
  • K.A. Becker

    History of the Stanford-Binet Intelligence Scales: Content and Psychometrics

    Stanford-Binet Intelligence Scales , Assessment Service Bulletin Number 1

    (2003)
  • A. Bolck et al.

    Estimating latent structure models with categorical variables: 1-Step versus 3-Step estimators

    Polit. Anal.

    (2004)
  • L. Borghans et al.

    The economics and psychology of personality traits

    J. Hum. Resour.

    (2008)
  • S. Bowles et al.

    Incentive-enhancing preferences: personality, behavior, and earnings

    Am. Econ. Rev.

    (2001)
  • M. Caliendo et al.

    Locus of control and job search strategies

    Rev. Econ. Stat.

    (2015)
  • Card, D., 1993. Using geographic variation in college proximity to estimate the return to schooling. NBER Working Paper...
  • D. Card

    The Causal Effect of Education on Earnings

  • P.T.J. Costa et al.

    Set like Plaster? Evidence for the Stability of Adult Personality

  • M. Croon

    Using Predicted Latent Scores in General Latent Structure Models

  • M. Cubel et al.

    Do personality traits affect productivity? Evidence from the lab

    Econ. J.

    (2016)
  • F. Cunha et al.

    The technology of skill formation

    Am. Econ. Rev. Pap. Proc.

    (2007)
  • Dahmann, S., Anger, S., 2014. The impact of education on personality: evidence from a German high school reform. IZA...
  • S.L. Dauber et al.

    Aspects of personality and peer relations of extremely talented adolescents

    Gifted Child Q.

    (1990)
  • A.L. Duckworth et al.

    What no child left behind leaves behind: the roles of IQ and self-control in predicting standardized achievement test scores and report card grades.

    J. Educ. Psychol.

    (2012)
  • Duckworth, A. L., Weir, D., 2010. Personality, lifetime earnings, and retirement wealth. Research Brief No. 235,...
  • S.M. Dynarski

    Does aid matter? Measuring the effect of student aid on college attendance and completion

    Am. Econ. Rev.

    (2003)
  • H.S. Farber et al.

    Learning and wage dynamics

    Q. J. Econ.

    (1996)
  • J.M. Fletcher

    The effects of personality traits on adult labor market outcomes: evidence from siblings

    J. Econ. Behav. Organ.

    (2013)
  • H.S. Friedman

    The multiple linkages of personality and disease

    Brain Behav. Immun.

    (2008)
  • H.S. Friedman et al.

    Does childhood personality predict longevity?

    J. Pers. Soc. Psychol.

    (1993)
  • A.H. Goldsmith et al.

    The impact of psychological and human capital on wages

    Econ. Inq.

    (1997)
  • R.D. Goodwin et al.

    Health status and the five-factor personality traits in a nationally representative sample

    J. Health Psychol.

    (2006)
  • J.B. Grossman et al.

    Does mentoring work? An impact study of the big brothers big sisters program

    Eval. Rev.

    (1998)
  • D.S. Hamermesh

    Life-cycle effects on consumption and retirement

    J. Labor Econ.

    (1984)
  • J.C. Hause

    Earnings profile: ability and schooling

    J. Polit. Econ.

    (1972)
  • J.J. Heckman et al.

    Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond

  • J.J. Heckman et al.

    The rate of return to the high-scope perry preschool program

    J. Pub. Econ.

    (2010)
  • J.J. Heckman et al.

    Understanding the mechanisms through which an influential early childhood program boosted adult outcomes

    Am. Econ. Rev.

    (2013)
  • J.J. Heckman et al.

    The effects of cognitive and noncognitive abilities on labor market outcomes and social behavior

    J. Labor Econ.

    (2006)
  • Cited by (87)

    • Do non-cognitive skills matter for alcohol consumption? Evidence from Russia

      2023, Journal of Comparative Economics
      Citation Excerpt :

      There is a growing body of literature studying the importance of non-cognitive skills, also referred to as personality traits1, in predicting social outcomes (Heckman et al., 2006). As a vital component of human capital, non-cognitive skills are found to affect educational attainment (Humburg, 2017), unemployment (Cuesta and Budria, 2017), wages (Brunello and Schlotter, 2011; Gensowski, 2018), mobility (Ayhan et al., 2020), and health-related outcomes, including longevity (Savelyev, 2020; Savelyev and Tan, 2019). Alcohol consumption is another essential part of social behavior, which may have harmful effect on one's well-being in case of excessive drinking.

    • Cognitive and non-cognitive abilities of immigrants: New perspectives on migrant quality from a selective immigration country

      2022, Journal of Economic Behavior and Organization
      Citation Excerpt :

      Its inverse is often referred to as Emotional Stability. Although not all five of them, the Big Five personality traits are important as they predict labor market outcomes (Chamorro-Premuzic and Furnham, 2003; Fletcher, 2013; Gensowski, 2018; Heineck and Anger, 2010; Mueller and Plug, 2006; Nyhus and Pons, 2005), occupational choice (Cobb-Clark and Tan, 2011), health and academic performance (Chamorro-Premuzic and Furnham, 2003; Furnham et al., 2003; Kappe and van der Flier, 2012; Noftle and Robins, 2007). In waves 5, 9, 13, and 17, HILDA collected an inventory of the Big-Five personality traits based on Saucier (1994) that can be used to construct measures for Extraversion, Agreeableness, Conscientiousness, Emotional Stability (the reverse of Neuroticism), and Openness to Experience.

    View all citing articles on Scopus
    1

    The activities of CEBI are financed by a grant from the Danish National Research Foundation. This paper and other versions of it have benefited immensely from discussions with numerous seminar participants. I am very grateful to everyone who provided helpful feedback, especially James J. Heckman, Steven N. Durlauf, and Gary S. Becker, Rémi Piatek, Mathilde Almlund, Katarína Borovičková, Deborah Cobb-Clark, Pia Pinger, Stefanie Schurer, Jeffrey Smith, Lucas Threinen and Philipp Eisenhauer. I am also indebted to Peter Savelyev, who generously shared his knowledge of the Terman data, and to Min Ju Lee and Molly Schnell who provided outstanding research assistance in the project's earlier stages.

    View full text