General intelligence (in the literature typically called "cognitive ability") is the best predictor of job performance by the standard measure, validity. Validity is the correlation between score (in this case cognitive ability, as measured, typically, by a paper-and-pencil test) and outcome (in this case job performance, as measured by a range of factors including supervisor ratings, promotions, training success, and tenure), and ranges between -1.0 (the score is perfectly wrong in predicting outcome) and 1.0 (the score perfectly predicts the outcome). See validity (psychometric). The validity of cognitive ability for job performance tends to increase with job complexity and varies across different studies, ranging from 0.2 for unskilled jobs to 0.8 for the most complex jobs.
A large meta-analysis (Hunter and Hunter, 1984) which pooled validity results across many studies encompassing thousands of workers (32,124 for cognitive ability), reports that the validity of cognitive ability for entry-level jobs is 0.54, larger than any other measure including job tryout (0.44), experience (0.18), interview (0.14), age (-0.01), education (0.10), and biographical inventory (0.37).
Because higher test validity allows more accurate prediction of job performance, companies have a strong incentive to use cognitive ability tests to select and promote employees. IQ thus has great practical importance in economic terms. The utility of using a one measure over another is proportional to the difference in their validities, all else equal. This is one economic reason why companies use job interviews (validity 0.14) rather than randomly selecting employees (validity 0.0).
Legal barriers, most prominently the 1971 United States Supreme Court decision Griggs v. Duke Power Co., have prevented American employers from directly using cognitive ability tests to select employees, despite the tests' high validity. Using cognitive ability scores in selection adversely affects some minority groups, because different groups have different mean scores on tests of cognitive ability.
Some researchers have echoed the popular claim that "in economic terms it appears that the IQ score measures something with decreasing marginal value. It is important to have enough of it, but having lots and lots does not buy you that much." (Detterman and Daniel, 1989)
However, some studies suggest IQ continues to confer large benefits even at very high levels. Ability and performance for jobs are linearly related, such that at all IQ levels, an increase in IQ translates into a concomitant increase in performance (Coward and Sackett, 1990). In an analysis of hundreds of siblings, it was found that IQ has a substantial effect on income independently of family background (Murray, 1998).
Other studies question the real-world importance of whatever is measured with IQ tests, especially for differences in accumulated wealth and general economic inequality in a nation. IQ correlates highly with school performance but this correlations seems to decrease the closer one gets to real-world outcomes, like job performance, and still lower for income. It explains less than one sixth of the income variance . Even for school grades, other factors explain most the variance. Regarding economic inequality, one study found that if we could magically give everyone identical IQs, we would still see 90 to 95 percent of the inequality we see today. Another recent study (2002) found that wealth, race and schooling are important to the inheritance of economic status, but IQ is not a major contributor and the genetic transmission of IQ is even less important. Some argue that IQ scores are used as an excuse for not trying to reduce poverty or otherwise improve living standards for all. Claimed low intelligence has historically been used to justify the feudal system and unequal treatment of women (but note that many studies find identical average IQs among men and women; see sex and intelligence). In contrast, others claim that the refusal of high-IQ elites to take IQ seriously as a cause of inequality is itself immoral.
