7 ms·

Lifetime Earnings Are 40-50% Heritable

48 points by barry-cotter 7y ago

barry-cotter 7y ago
> Using twenty years of earnings data on Finnish twins, we find that about 40% of the variance of women’s and little more than half of men’s lifetime labour earnings are linked to genetic factors. The contribution of the shared environment is negligible. We show that the result is robust to using alternative definitions of earnings, to adjusting for the role of education, and to measurement errors in the measure of genetic relatedness.
- oli5679 7y ago
  There is extensive literature on twin studies that finds effects of roughly this magnitude on a range of health/earnings/educational metrics. 40%-50% genes 40%-50% random/non-shared environments and small impact of shared environment. https://www.researchgate.net/profile/Bruce_Sacerdote/publication/228389297_Nature_and_Nurture_Effects_on_Children%27s_Outcomes_What_Have_We_Learned_from_Studies_of_Twins_and_Adoptees/links/55b62f1808ae9289a08aabb3.pdf https://www.researchgate.net/profile/Bruce_Sacerdote/publica...
  - eloff 7y ago
    Also IQ seems structured this way, but even more heritable and almost nothing to do with shared environment. Incidentally IQ is also strongly correlated with lifetime earnings. In fact if you can know only one thing about a job candidate, it's the measure you should pick.
    - NateEag 7y ago
      A candidate that will earn a lot of money is not what you're looking for when hiring. You want someone who will do the work well and will help the company succeed. Indeed, you could argue that a high earner is, all else being equal, something you should avoid selecting as a hiring manager.
      - jdavis703 7y ago
        This means the manager needs to correctly align employee incentives. For example pay sales people a commission or give employees shares. This is business school 101.
        NateEag 7y ago
        I do not believe a person's salary history gives you any useful information about their effectiveness as an employee. I have worked with people who had higher salaries than I did who were clearly much worse at the job (a backend architect at a past gig told me that UTF-8 supported only 256 characters, and refused to acknowledge it when I pointed out sources that showed he was wrong).
      - krageon 7y ago
        Am I correct in reading this as you making the claim that your salary is not directly (or even at all) commensurate with your contribution to the company?
        JoeAltmaier 7y ago
        The claim was only that hiring by previous income is not commensurate with contribution at the new job.
      - eloff 7y ago
        Sorry, I see how that can be confusing that I switched topics like that. I mean IQ is the best single measure predictor of success on the job. It's also strongly correlated with lifetime earnings. And it should surprise nobody that success on the job and lifetime earnings are very tightly coupled.
    - Symmetry 7y ago
      It has almost nothing to do with shared environment in the wealthy first world countries we study this in. But malnutrition, disease, and other factors can certainly have large effects. The introduction of iodized salt in the US raised IQs by 10 points in certain areas where people's diets and water were sufficiently iodine-deficient.
      - JoeAltmaier 7y ago
        And the 'free lunch program' raised public health/reduced malnutrition by a large factor when introduced in the US. Urban legend has it that the military mandated it because of poor WWII conscript health, but free lunch predated that by 50 years. It was a federal act only after WWII because of scarcity and the decline of local programs.
      - eloff 7y ago
        Yes, that's an excellent point. The socioeconomic status of your parents is a big influence up to a point. In developed counties we don't see this effect as much because it's the baseline. Almost everybody gets sufficient nutrition and medical care to meet the very low standards where it would otherwise negatively affect your intelligence and development.
  - evrydayhustling 7y ago
    So, they do this by comparing correlations in MZ (genetically identical) and DZ (typical sibling genetics) twin outcomes. Doesn't that assume that the fact of being DZ vs MZ does not itself create environmental (non-genetic) effects? The identical twins I know face particular social pressures to respond to their twin identity, which could drive towards outcomes that are more correlated -- or not! But it seems weird to base a branch of literature on the assumption that it's not. Is this addressed?
    - tomp 7y ago
      You can also compare identical twins that grow up in the same family, vs. identical twins that were separated at birth... although I imagine you wouldn't have a lot of samples.
    - Symmetry 7y ago
      That's a reasonable sort of question but would you say that MZ twins are treated differently enough to explain 40% of variation in earnings? If they were all locked in cellars out of shame I could see that being the case but that doesn't square with the identical twins I've known. But it actually is addressed by other studies such as adoption studies that show generally the same results. And, of course, there are potential problems with adoption studies too. But wouldn't it be suspicious if every[1] method of studying the problem we tried gives fairly close numbers but only because they all happen to be biased by the same amount in the same direction? [1]GWASes give lower numbers but we know that there are many sorts of genetic interaction they don't cover so this is expected.
    - barry-cotter 7y ago
      This is an empirical question and as far as we can tell if there’s pressure to be more similar or more different it washes out. Identical twins reared together are no more similar than ones raised apart on a huge host of traits.
    - oli5679 7y ago
      Yes that is valid point about the limitation of this approach. There are 3 methods to address it, none of them are perfect: (1) Statistically compare the population of twins vs the population of non-twins. The paper I linked to has more specifics on this, but twins earn similar amounts of money, live similar lengths of time, do similarly well in exams vs. non-twins, so it any twin-specific genetic effect has to simultaneously be strong enough to cause this discrepancy, but not strong enough to impact population means. (2) Compare adoptees to genetic offspring of parents. This has the same issue that you pointed out (maybe there is something specific about adoptees) but the two together find roughly similar effect magnitudes, which reenforce each-other. I'm actually a bit more concerned about adoption being less 'clean' an identification strategy than twin studies, because it's a complicated social process. (3) Look at genetic variation at population level and find genetic markers that explain variation, using Mendelian randomization as identification strategy - this is technically very challenging, and has only recently become feasible. So far research have only been able to explain around 7% of IQ for example with specific genetic markers, but it will be interesting to see if this creeps up as the field matures. The big puzzle here is the large variation that we between cultures - moving time-periods, or countries can significantly change your life-expectancy, earnings, test-scores or even IQ. I don't know how to reconcile this with the strange finding of this research strand is that family level environmental effects (shared environment) seem to be much less important than the conventional wisdom would suggest. Links https://www.sciencedirect.com/science/article/pii/B0080427073001759 https://www.sciencedirect.com/science/article/pii/B008042707... (gated) https://en.wikipedia.org/wiki/Mendelian_randomization https://en.wikipedia.org/wiki/Mendelian_randomization https://www.newscientist.com/article/2163484-found-more-than-500-genes-that-are-linked-to-intelligence/ https://www.newscientist.com/article/2163484-found-more-than... https://en.wikipedia.org/wiki/Flynn_effect https://en.wikipedia.org/wiki/Flynn_effect
- Symmetry 7y ago
  Wasn't there also a paper that came out fairly recently looking at Swedish administrative data instead which showed something on the order of 1/4 gentic 1/4 shared environment? My general impression has been that lifetime earnings had a shared environmental factor from parental help that wasn't there in other things like scholastic achievement. I'll see if I can track that down. Though possibly the difference might just be high investment income from some children moving the average in studies that take a mean rather than a median.
tkyjonathan 7y ago
I have a feeling that this is going to include things like IQ and then we will get into a big racist mess.
- 0xB31B1B 7y ago
  Strong disagree that IQ is gonna be an explanatory variable here. Not to get political here, but DJTs children, none are “outliers” as far as intelligence goes but all will inherit their fathers (outlier WRT income) income generation capacity within an order of magnitude.
  - lotsofpulp 7y ago
    He himself inherited it.
  - username90 7y ago
    This study found no correlation between environment and earnings when genes were accounted for. So you have a gene part and a random part, but parenting and such doesn't matter. Of course it might not apply to a few special cases like if you inherited a billion dollars, but for 99% of us that is not the case.
  - navigatesol 7y ago
    >but DJTs children, none are “outliers” as far as intelligence goes How on earth could you possibly know this?
    - ceejayoz 7y ago
      https://twitter.com/ndrew_lawrence/status/1189722490819481600 https://twitter.com/ndrew_lawrence/status/118972249081948160... > Actually just said by Donald Trump Jr: "I wish my name was Hunter Biden. I could go abroad and make millions off my father's presidency. I'd be a really rich guy" You can probably make some reasonable intelligence estimates off that sort of statement.
      - 7y ago
shusson 7y ago
> we assumed ... that there is no correlation between genetic factors and the shared environment I'm no expert, but that seems like the biggest issue. I mean the study says that income is heritable, which by its very nature would affect the environment that right?
- timini 7y ago
  It will affect the environment of BOTH twins
  - gpderetta 7y ago
    Isn't that the point of the parent?
    - barry-cotter 7y ago
      You can estimate true heritability by comparing fraternal and identical twins, both of which will have shared environment, but identical twins are identical genetically and fraternal ones are as similar as any other sibling pair.
      - gpderetta 7y ago
        right, the part that I missed is that they are also comparing non-twin siblings.
      - shusson 7y ago
        > You can estimate true heritability by comparing fraternal and identical twins Can you explain this a bit more?
        barry-cotter 7y ago
        https://en.wikipedia.org/wiki/Twin_study https://en.wikipedia.org/wiki/Twin_study > The classical twin design compares the similarity of monozygotic (identical) and dizygotic (fraternal) twins. If identical twins are considerably more similar than fraternal twins (which is found for most traits), this implicates that genes play an important role in these traits. By comparing many hundreds of families with twins, researchers can then understand more about the roles of genetic effects, shared environment, and unique environment in shaping behavior.
YinglingLight 7y ago
>"...the share of variance of lifetime earnings explained by education is clearly less than a tenth (in our data). This comparison suggests that the variation in lifetime earnings that can be attributed to genetic variation is not negligible and warrants attention. The results of our auxiliary analyses also suggest - but do not conclusively show -that removing the effects of education on the lifetime earnings of the cohorts we study does not change these heritability estimates."
doorhurdle 7y ago
What does this say about mass migration into the west from the third-world?
leto_ii 7y ago
Unfortunately I can't dedicate too much time to reading the article right now, but did anybody understand how they managed to isolate the genetic vs environmental components?
- gpderetta 7y ago
  I have been trying to read it, but I can't figure out that part. Possibly via adopted twins. edit: but it seems they do not use adoption data.
  - leto_ii 7y ago
    Indeed, I didn't see any adoption data either.
- username90 7y ago
  You do it by comparing identical twins against fraternal twins and see how the variance differ. That way you have 3 variables, genes (identical twins have same genes, fraternal twins just have similar), the home and parenting part, and all other parts that aren't related to your parents at all. This study in particular found that just the genes and the other factors were relevant, while the home wasn't.
  - leto_ii 7y ago
    But shouldn't they also include people with completely different genes, but the same educational background? Fraternal twins share less than identical ones, but they still share a lot. It would be interesting to see if unrelated people who come from the same environment exhibit vastly different earnings outcomes.
    - gpderetta 7y ago
      I assume it is hard to objectively define and measure 'same environment' for arbitrary pairs. Using sibilings (fraternal or twins) is a way around that.
  - 7y ago
niktezak 7y ago
It would be valuable to try and reproduce these findings in a country like the US or UK whose citizens have been found to exhibit much lower socioeconomic mobility [1] whereas the Nordic countries (as well as Canada and Australia) are known to provide much more mobility. I would be surprised if the results held up unaffected. [1] https://www.oecd.org/centrodemexico/medios/44582910.pdf https://www.oecd.org/centrodemexico/medios/44582910.pdf
nabla9 7y ago
I suspect that genes that affect immune system play big role in the heritable intelligence just like immune plays role in the environmental factors affecting IQ.
deleted 7y ago
[deleted]
ep103 7y ago
> The contribution of the shared environment is negligible. What does this mean?
known 7y ago
Doesn't Finland have https://en.wikipedia.org/wiki/Inheritance_tax https://en.wikipedia.org/wiki/Inheritance_tax

48 points by barry-cotter 7y ago

> Using twenty years of earnings data on Finnish twins, we find that about 40% of the variance of women’s and little more than half of men’s lifetime labour earnings are linked to genetic factors. The contribution of the shared environment is negligible. We show that the result is robust to using alternative definitions of earnings, to adjusting for the role of education, and to measurement errors in the measure of genetic relatedness.

oli5679 7y ago
There is extensive literature on twin studies that finds effects of roughly this magnitude on a range of health/earnings/educational metrics. 40%-50% genes 40%-50% random/non-shared environments and small impact of shared environment. https://www.researchgate.net/profile/Bruce_Sacerdote/publication/228389297_Nature_and_Nurture_Effects_on_Children%27s_Outcomes_What_Have_We_Learned_from_Studies_of_Twins_and_Adoptees/links/55b62f1808ae9289a08aabb3.pdf https://www.researchgate.net/profile/Bruce_Sacerdote/publica...
- eloff 7y ago
  Also IQ seems structured this way, but even more heritable and almost nothing to do with shared environment. Incidentally IQ is also strongly correlated with lifetime earnings. In fact if you can know only one thing about a job candidate, it's the measure you should pick.
  - NateEag 7y ago
    A candidate that will earn a lot of money is not what you're looking for when hiring. You want someone who will do the work well and will help the company succeed. Indeed, you could argue that a high earner is, all else being equal, something you should avoid selecting as a hiring manager.
    - jdavis703 7y ago
      This means the manager needs to correctly align employee incentives. For example pay sales people a commission or give employees shares. This is business school 101.
      - NateEag 7y ago
        I do not believe a person's salary history gives you any useful information about their effectiveness as an employee. I have worked with people who had higher salaries than I did who were clearly much worse at the job (a backend architect at a past gig told me that UTF-8 supported only 256 characters, and refused to acknowledge it when I pointed out sources that showed he was wrong).
    - krageon 7y ago
      Am I correct in reading this as you making the claim that your salary is not directly (or even at all) commensurate with your contribution to the company?
      - JoeAltmaier 7y ago
        The claim was only that hiring by previous income is not commensurate with contribution at the new job.
    - eloff 7y ago
      Sorry, I see how that can be confusing that I switched topics like that. I mean IQ is the best single measure predictor of success on the job. It's also strongly correlated with lifetime earnings. And it should surprise nobody that success on the job and lifetime earnings are very tightly coupled.
  - Symmetry 7y ago
    It has almost nothing to do with shared environment in the wealthy first world countries we study this in. But malnutrition, disease, and other factors can certainly have large effects. The introduction of iodized salt in the US raised IQs by 10 points in certain areas where people's diets and water were sufficiently iodine-deficient.
    - JoeAltmaier 7y ago
      And the 'free lunch program' raised public health/reduced malnutrition by a large factor when introduced in the US. Urban legend has it that the military mandated it because of poor WWII conscript health, but free lunch predated that by 50 years. It was a federal act only after WWII because of scarcity and the decline of local programs.
    - eloff 7y ago
      Yes, that's an excellent point. The socioeconomic status of your parents is a big influence up to a point. In developed counties we don't see this effect as much because it's the baseline. Almost everybody gets sufficient nutrition and medical care to meet the very low standards where it would otherwise negatively affect your intelligence and development.
- evrydayhustling 7y ago
  So, they do this by comparing correlations in MZ (genetically identical) and DZ (typical sibling genetics) twin outcomes. Doesn't that assume that the fact of being DZ vs MZ does not itself create environmental (non-genetic) effects? The identical twins I know face particular social pressures to respond to their twin identity, which could drive towards outcomes that are more correlated -- or not! But it seems weird to base a branch of literature on the assumption that it's not. Is this addressed?
  - tomp 7y ago
    You can also compare identical twins that grow up in the same family, vs. identical twins that were separated at birth... although I imagine you wouldn't have a lot of samples.
  - Symmetry 7y ago
    That's a reasonable sort of question but would you say that MZ twins are treated differently enough to explain 40% of variation in earnings? If they were all locked in cellars out of shame I could see that being the case but that doesn't square with the identical twins I've known. But it actually is addressed by other studies such as adoption studies that show generally the same results. And, of course, there are potential problems with adoption studies too. But wouldn't it be suspicious if every[1] method of studying the problem we tried gives fairly close numbers but only because they all happen to be biased by the same amount in the same direction? [1]GWASes give lower numbers but we know that there are many sorts of genetic interaction they don't cover so this is expected.
  - barry-cotter 7y ago
    This is an empirical question and as far as we can tell if there’s pressure to be more similar or more different it washes out. Identical twins reared together are no more similar than ones raised apart on a huge host of traits.
  - oli5679 7y ago
    Yes that is valid point about the limitation of this approach. There are 3 methods to address it, none of them are perfect: (1) Statistically compare the population of twins vs the population of non-twins. The paper I linked to has more specifics on this, but twins earn similar amounts of money, live similar lengths of time, do similarly well in exams vs. non-twins, so it any twin-specific genetic effect has to simultaneously be strong enough to cause this discrepancy, but not strong enough to impact population means. (2) Compare adoptees to genetic offspring of parents. This has the same issue that you pointed out (maybe there is something specific about adoptees) but the two together find roughly similar effect magnitudes, which reenforce each-other. I'm actually a bit more concerned about adoption being less 'clean' an identification strategy than twin studies, because it's a complicated social process. (3) Look at genetic variation at population level and find genetic markers that explain variation, using Mendelian randomization as identification strategy - this is technically very challenging, and has only recently become feasible. So far research have only been able to explain around 7% of IQ for example with specific genetic markers, but it will be interesting to see if this creeps up as the field matures. The big puzzle here is the large variation that we between cultures - moving time-periods, or countries can significantly change your life-expectancy, earnings, test-scores or even IQ. I don't know how to reconcile this with the strange finding of this research strand is that family level environmental effects (shared environment) seem to be much less important than the conventional wisdom would suggest. Links https://www.sciencedirect.com/science/article/pii/B0080427073001759 https://www.sciencedirect.com/science/article/pii/B008042707... (gated) https://en.wikipedia.org/wiki/Mendelian_randomization https://en.wikipedia.org/wiki/Mendelian_randomization https://www.newscientist.com/article/2163484-found-more-than-500-genes-that-are-linked-to-intelligence/ https://www.newscientist.com/article/2163484-found-more-than... https://en.wikipedia.org/wiki/Flynn_effect https://en.wikipedia.org/wiki/Flynn_effect
Symmetry 7y ago
Wasn't there also a paper that came out fairly recently looking at Swedish administrative data instead which showed something on the order of 1/4 gentic 1/4 shared environment? My general impression has been that lifetime earnings had a shared environmental factor from parental help that wasn't there in other things like scholastic achievement. I'll see if I can track that down. Though possibly the difference might just be high investment income from some children moving the average in studies that take a mean rather than a median.

tkyjonathan 7y ago

I have a feeling that this is going to include things like IQ and then we will get into a big racist mess.

0xB31B1B 7y ago
Strong disagree that IQ is gonna be an explanatory variable here. Not to get political here, but DJTs children, none are “outliers” as far as intelligence goes but all will inherit their fathers (outlier WRT income) income generation capacity within an order of magnitude.
- lotsofpulp 7y ago
  He himself inherited it.
- username90 7y ago
  This study found no correlation between environment and earnings when genes were accounted for. So you have a gene part and a random part, but parenting and such doesn't matter. Of course it might not apply to a few special cases like if you inherited a billion dollars, but for 99% of us that is not the case.
- navigatesol 7y ago
  >but DJTs children, none are “outliers” as far as intelligence goes How on earth could you possibly know this?
  - ceejayoz 7y ago
    https://twitter.com/ndrew_lawrence/status/1189722490819481600 https://twitter.com/ndrew_lawrence/status/118972249081948160... > Actually just said by Donald Trump Jr: "I wish my name was Hunter Biden. I could go abroad and make millions off my father's presidency. I'd be a really rich guy" You can probably make some reasonable intelligence estimates off that sort of statement.
    - 7y ago

shusson 7y ago

> we assumed ... that there is no correlation between genetic factors and the shared environment I'm no expert, but that seems like the biggest issue. I mean the study says that income is heritable, which by its very nature would affect the environment that right?

timini 7y ago
It will affect the environment of BOTH twins
- gpderetta 7y ago
  Isn't that the point of the parent?
  - barry-cotter 7y ago
    You can estimate true heritability by comparing fraternal and identical twins, both of which will have shared environment, but identical twins are identical genetically and fraternal ones are as similar as any other sibling pair.
    - gpderetta 7y ago
      right, the part that I missed is that they are also comparing non-twin siblings.
    - shusson 7y ago
      > You can estimate true heritability by comparing fraternal and identical twins Can you explain this a bit more?
      - barry-cotter 7y ago
        https://en.wikipedia.org/wiki/Twin_study https://en.wikipedia.org/wiki/Twin_study > The classical twin design compares the similarity of monozygotic (identical) and dizygotic (fraternal) twins. If identical twins are considerably more similar than fraternal twins (which is found for most traits), this implicates that genes play an important role in these traits. By comparing many hundreds of families with twins, researchers can then understand more about the roles of genetic effects, shared environment, and unique environment in shaping behavior.

YinglingLight 7y ago

>"...the share of variance of lifetime earnings explained by education is clearly less than a tenth (in our data). This comparison suggests that the variation in lifetime earnings that can be attributed to genetic variation is not negligible and warrants attention. The results of our auxiliary analyses also suggest - but do not conclusively show -that removing the effects of education on the lifetime earnings of the cohorts we study does not change these heritability estimates."

doorhurdle 7y ago

What does this say about mass migration into the west from the third-world?

leto_ii 7y ago

Unfortunately I can't dedicate too much time to reading the article right now, but did anybody understand how they managed to isolate the genetic vs environmental components?

gpderetta 7y ago
I have been trying to read it, but I can't figure out that part. Possibly via adopted twins. edit: but it seems they do not use adoption data.
- leto_ii 7y ago
  Indeed, I didn't see any adoption data either.
username90 7y ago
You do it by comparing identical twins against fraternal twins and see how the variance differ. That way you have 3 variables, genes (identical twins have same genes, fraternal twins just have similar), the home and parenting part, and all other parts that aren't related to your parents at all. This study in particular found that just the genes and the other factors were relevant, while the home wasn't.
- leto_ii 7y ago
  But shouldn't they also include people with completely different genes, but the same educational background? Fraternal twins share less than identical ones, but they still share a lot. It would be interesting to see if unrelated people who come from the same environment exhibit vastly different earnings outcomes.
  - gpderetta 7y ago
    I assume it is hard to objectively define and measure 'same environment' for arbitrary pairs. Using sibilings (fraternal or twins) is a way around that.
- 7y ago

niktezak 7y ago

It would be valuable to try and reproduce these findings in a country like the US or UK whose citizens have been found to exhibit much lower socioeconomic mobility [1] whereas the Nordic countries (as well as Canada and Australia) are known to provide much more mobility. I would be surprised if the results held up unaffected. [1] https://www.oecd.org/centrodemexico/medios/44582910.pdf https://www.oecd.org/centrodemexico/medios/44582910.pdf

nabla9 7y ago

I suspect that genes that affect immune system play big role in the heritable intelligence just like immune plays role in the environmental factors affecting IQ.

deleted 7y ago

[deleted]

ep103 7y ago

> The contribution of the shared environment is negligible. What does this mean?

known 7y ago

Doesn't Finland have https://en.wikipedia.org/wiki/Inheritance_tax https://en.wikipedia.org/wiki/Inheritance_tax