We know that educational attainment is probably the single biggest determinant of urban economic success. If you're hoping to predict average household incomes, looking at the percentage of the population with a 4-year college degree is a pretty good place to start. But let's take this a step further: to what extent does graduating from an elite university affect both pay and performance?

It turns out, according to this recent study, that the pedigree of one's university isn't all that good at predicting motivation and talent. It does, however, impact pay. Average early career salaries for graduates of the top 10 colleges in the US are almost 50% higher than those with degrees from the ten colleges within the City University New York school system. This is according to data from Payscale and the US Department of Education.

But this pay delta doesn't necessarily match the performance delta that you might expect. The study found that for every 1,000 positions that you move in Webometrics' global university ranking (which is what they used for their research), overall performance only changes by about 1.9%. In other words, a graduate from the alleged number one university is only going to perform, on average, about 1.9% better than someone from the 1,000th best school.

I'm not exactly sure how to practically interpret a 1.9% improvement in performance. But 2% compounding on 2% each year should get you somewhere. Regardless, graduates from top universities do generally score higher on competency examinations. The reasoning behind this is thought to be at least twofold: 1) more selective admissions create a better pool of students and 2) top universities should provide better training.

Whether that's enough to justify the higher pay is a separate discussion. But if you're looking to measure urban economic success, the data does suggest that elite universities should lead to overall higher average incomes.

I just came across this chart from Axios, which relies on data from the Federal Reserve Bank of St. Louis and the Kaiser Family Foundation. It compares median household income against the average cost of employer health insurance (in the United States).

What it is saying is that, after adjusting for inflation, the median household income has only increased by 2% from 1999 to 2017, whereas employer health insurance costs have increased by some 121% over this same time period.

The takeaway: Rising healthcare costs are believed to be eating away at take-home pay in the US. As of 2017, health insurance costs were estimated to represent about 30% of the average household income. That feels like a big number to me.

“People get income for doing stuff, and they get income for owning stuff. Increasingly the latter. And the ownership share of income goes to a small slice of households that own almost all the stuff.”

This is a quote from a recent article by Steve Roth over at Evonomics, where he breaks down the share of US household income that is derived from “labor” vs. “capital.” In other words, how much money do households make from working (trading their time for money) and how much do they make from their existing wealth (that is, owning stuff)?

If I were to oversimplify how he calculates this (you can read all of the details, here), it is: (Income - Labor Compensation) / Income. Take all of the household income. Subtract the money made from doing stuff. And then divide it by total income to get the percentage made from “unearned property income.” There are gray areas and others things to consider, but that’s the gist of it.

What he discovers and argues is that basically 50% of household income comes from simply being wealthy and owning stuff. He also reminds us that approximately 60% of US wealth is… “earned the old-fashioned away: it’s inherited.”