What is the Relationship Between IQ and National Income?

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Executive Summary

Intelligence is typically considered to correlate highly with the income of a country.
In this article, we analyze the correlation of this thought to be an established relationship.

Introduction

We took the intelligence and national income data from World Data and ran a regression analysis to try to determine the relationship. The following graph is what we found when we included the entire data set of countries in the regression.

We will get into some details shortly, but the resulting.30 shows that there is a very weak relationship between the IQ scores of a country and the national income of that country.

Viewing Some of the Outliers

Some of the countries that very much stood out to us were the following:

One significant item that stands out is that many countries that have large amounts of natural resources can attain a high national income with a moderate to low average IQ of its citizens.

Oil is King

All of the countries in royal blue, are predominantly based around resource extraction and have considerable valuable natural resources like oil.

Oil is the number one natural resource that can produce a high income. Norway has a very high average national income. They have a reasonably high average IQ, but while having the same average IQ as Sweden, Norway has 33% more national income per person. However, Norway has large oil reserves — although they were relatively recently discovered.

Before Norway discovered oil in the North Sea (which it shares with the UK), Norway had lower average income than Swedes, as Swedes had manufacturing as a prominent part of their economy.

Saudi Arabia Versus Qatar

One interesting comparison is Saudi Arabia versus Qatar. These are two similar countries — and both highly dependent upon oil. Both have a similar average IQ. However, Qatar has nearly 5x the average national income.

Why would that be the case?

The question is answered, reviewing the population of each country.

Saudi Arabia: 33 M
Qatar: 2.8 M

Saudi Arabia has far more people per its natural resource base.

As much of the national income of Saudi Arabia is controlled and flows to roughly 1500 people, the only way for Saudi Arabia to have such a low income is that much of its population lives in poverty. This is explained in the following quotation.

Moreover, most of the citizens of Saudi Arabia subsist largely on state subsidies derived from oil revenues which have been falling partly due to population expansion. This fall in payments to the young can hardly help but create social tensions in that country. – The Party’s Over: Oil, War and the Fate of Industrial Societies

Banking Centers and Average National Income

The countries in orange are banking centers. Banking centers attract income tax evasion. Therefore, Switzerland, and Bermuda and the UAE are outliers and have a higher average income becuase of this. The UAE also has oil resources.

Running the Regression With These Outliers Removed

Once the outliers are just discussed removed, this is the correlation between average income and average IQ.

At .43, the correlation improves but is still low. This means that the average IQ of a country is somewhat correlated, but the relationship is weak.

The Pattern

While average income correlates with average IQ, and it is also true that without a natural resource, that low average IQ countries tend to have low average national income.

However, a major factor that reduces the correlation is that there are many countries with similar or identical average IQs that have very different average national incomes.

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Conclusion

Countries often focus on educating their populations to increase the skills and IQ of their populations.

There are two problems with this:

Around 1/2 of IQ is thought to be genetic.
IQ is only weakly related to national income.

At each place, from politicians to university president and to CEOs, we hear that education is key to better future incomes. And while that may be true at the individual level, what if it is not true at the national level? Furthermore, it is often overlooked how at the individual level, it is easy to show higher income from higher IQ or mental credentials. All that is necessary for enough employers to believe that mental credential is preferable over a candidate without one — and those that hold it will see their incomes rise.

However, just because employers think something is true does not mean it is true.

This correlation analysis indicates that trying to push up national IQ is not a direct way to increase national income.

Import High Skilled (IQ) Workers Leads to a Higher Average National Income?

Furthermore, much of the US policy of collecting foreign workers is that the economy needs “high skilled” workers — who presumably have high average IQs to fill jobs is unlikely to result in a higher average national income. We cover in the article How the Pay Level of H1-B Visa Workers Contradicts Industry’s High Skills Arguments, how this is normally simply reclassifying non-high skilled foreign workers as high skilled to obtain lower-priced and compliant labor. However, let us assume for a moment that those supporting foreign worker programs were not lying about the skills of their imported workers.

As many new foreign workers drive down wages, it has a known negative effect on increasing income inequality (which reduces the stability of the country). This study should call into question whether simply trying to obtain high intelligence individuals will even increase national income even if the income inequality factor is removed from the analysis.

What is clear is that companies that import foreign workers will be able to make more money, as they pay less for workers whose work status and potential citizenship they control. So it is clear why companies want to pay less. But is there any evidence that the income of these companies will increase because of foreign workers? In the case of firms that are mills for foreign workers like Cognizant that as we cover in the article Cognizant Receives Approval for 28,908 H1-B Visas in a Single Year, brought in around 30,000 Indians into the US on H1-B in one year. Does this increase the national income? Or instead, does it simply allow Cognizant to undercut competitors due to its lower worker costs?

Cognizant’s model is to approach companies and offer to outsource their IT department. This means that most of the IT department is fired, and Cognizant H1-B visa workers take over the work.

Again, is this increasing the national income? It depresses the wages of the fired employees of the company, moves much of the money to the salespeople and senior members of Cognizant — so has a highly negative effect on income inequality. Cognizant is an Indian company, and India is a country that has been so destabilized by income inequality (among other factors) that is citizens dream of coming to the US. So they can destabilize the US in the same way they have destabilized India.

The Danger in Basing Policy on Evidence Free Claims

There is an enormous number of questions in this area that are unanswered. And national leaders in the US are taking unevidenced claims by companies that have no interest in increasing the national income — but are focused on increasing only the income of themselves and their company.

References

https://www.worlddata.info/iq-by-country.php

https://en.wikipedia.org/wiki/Oil_reserves_in_the_United_Arab_Emirates

*https://www.amazon.com/gp/product/B004FPZ3DK/ref=dbs_a_def_rwt_bibl_vppi_i2

https://en.wikipedia.org/wiki/Gabon

Gabon’s economy is dominated by oil. Oil revenues constitute roughly 46% of the government’s budget, 43% of the gross domestic product (GDP), and 81% of exports. Oil production is currently declining rapidly from its high point of 370,000 barrels per day in 1997. Some estimates suggest that Gabonese oil will be expended by 2025.