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.

Here's a chart from Knight Frank's 2019 Global Affordability Monitor that I think you'll find interesting:

It compares real home price growth and real household income growth (after tax) over the last 5 years for 32 world cities. The bolded percentages represent the former and the non-bolded percentages represent the latter.

Consider the variations here.

Amsterdam saw a real home price change of 63.6%, but a household income change of only 4.4% (although the circle looks to be in the wrong spot if this number is correct).

Moscow, on the other hand, saw flat home prices (0.1%) and a 22.7% increase in household income.

Though San Francisco is the star in terms of income growth.

Sao Paulo, unfortunately, saw a dramatic decline in both home prices and incomes. It's in the bottom left corner.

When I look at this chart, I don't see a strong correlation between household incomes and home prices. And the proportions of the chart tell you that the y-axis is moving more than the x-axis.

But if the top number exceeds the bottom number, then you could come to the conclusion that housing affordability has gotten worse over the last 5 years.

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.

Here's a chart from Knight Frank's 2019 Global Affordability Monitor that I think you'll find interesting:

It compares real home price growth and real household income growth (after tax) over the last 5 years for 32 world cities. The bolded percentages represent the former and the non-bolded percentages represent the latter.

Consider the variations here.

Amsterdam saw a real home price change of 63.6%, but a household income change of only 4.4% (although the circle looks to be in the wrong spot if this number is correct).

Moscow, on the other hand, saw flat home prices (0.1%) and a 22.7% increase in household income.

Though San Francisco is the star in terms of income growth.

Sao Paulo, unfortunately, saw a dramatic decline in both home prices and incomes. It's in the bottom left corner.

When I look at this chart, I don't see a strong correlation between household incomes and home prices. And the proportions of the chart tell you that the y-axis is moving more than the x-axis.

But if the top number exceeds the bottom number, then you could come to the conclusion that housing affordability has gotten worse over the last 5 years.