Teacher Pay Structure and Teacher Quality: The Crucial Role of Teacher Compensation in Shaping the Teacher Workforce

1
Teacher Pay Structure and Teacher Quality The
Crucial Role of Teacher Compensation in Shaping
the Teacher Workforce

• Dan D. Goldhaber
• University of Washington The Urban Institute

2
Policy Significance

• Teachers Matter!
• Teacher quality can explain more than one
  grade-level equivalent in test performance
  (Hanushek, 1992)
• Impacts of teacher quality can persist for many
  years (Sanders and Rivers, 1996)
• Tremendous variation in teacher effectiveness
  (Bembry et al, 1998, Hanushek, 1992 Sanders and
  Rivers, 1996)
• Impact of teacher quality is far larger than any
  other quantifiable schooling input (Goldhaber,
  2002)
• Tremendous investment in teachers
• Largest single expenditure category is
  instructional salaries (NCES Digest of Education
  Statistics, 2001)
• Investment of over 1.7 million for a teacher
  that stays in an NC district for 30 years
  (Goldhaber and Anthony, 2002)

3
Newer Evidence Suggests that Teacher Academic
Skills Predict Quality

• Measures of teacher academic skills correlated
  with student achievement
• Performance on standardized tests (Ferguson and
  Ladd, 1996)
• Tests of verbal ability (Hanushek, 1992
  Ehrenberg and Brewer, 1995)
• College Selectivity (Ehrenberg and Brewer, 1994)
• Teacher performance on licensure exams (Ferguson,
  1991, 1998, Strauss and Sawyer, 1986)

4
Concern About Teachers Skills

• On average, teachers have
• Lower standardized test scores
• Require more remediation in college
• Attend lower quality undergraduate institutions
• College graduates with high test scores are less
  likely to take jobs, employed teachers are less
  likely to stay, and former teachers with high
  test scores are less likely to return (Murnane,
  et al, 1991)

5
Individual and InstitutionalSAT Scores
? 58
? 42
Data Source Baccalaureate and Beyond
6
Its Key to Attract and Retain High Quality
Teachers
Teacher Salaries
Teacher Quality
Student Outcomes
7
Teacher Salaries and Teacher Quality

• Salaries affect the decision to enter teaching
  and the duration of the teaching career (Murnane,
  Olsen 1989)
• Higher salaries are associated with
  better-qualified teachers (Figlio, 1997, 2002
  Ferguson, 1991)
• Salaries affect student performance (Sanders,
  1993 Manski, 1985)

8
Salaries Are Important But Not The Whole Story

• Recent research shows teachers care a great deal
  about working conditions and the characteristics
  of the students they teach (compensating
  differentials)
• Hanushek et al.
• Still on the margin salaries are an important
  tool to influence the distribution of teachers
  across schools and students as well as the
  quality of the teacher workforce
• So how have teacher salaries changed?

9
Its Complicated!
10
What is the Right Benchmark?

• Many Ways to Gauge Changes in Compensation
• Growth in real versus nominal salaries
• Average versus starting salaries
• Salaries adjusted for compensating differentials
• Teacher salaries relative to those in other
  occupations
• What we really care about is the attractiveness
  of a career in teaching

Each of these may tell a different story
11
Relative to Other Occupations

• Were beginning to see a slight improvement in
  salaries, but its a drop in the bucket compared
  with what needs to be done to hire sufficient
  numbers of talented teachers. . . When
  engineering, law, accounting and computer firms
  need high-quality employees, theyre willing to
  pay good salaries to attract the best and
  brightest. It shouldnt be any different when it
  comes to educating our children, Sandra Feldman,
  AFT President
• why should people believe the laws of supply
  and demand end at the schoolhouse door ?
• Bob Chase, Former NEA President

12
Starting Salaries in Teaching and Selected Other
Occupations in 2000 (1)
Source AFT Salary Survey 2001
13
Starting Salaries in Teaching and Selected Other
Occupations in 2000 (2)
Source AFT Salary Survey 2001
14
What Would It Cost To Raise Teacher Salaries With
To That Of Other Professionals?
1999 Average Annual Salary Increase In Teacher Salary Total Necessary Spending On Education Needed Spending Per Pupil
Teacher 48,689 -- 355 billion 6,508
Family Physician 133,900 175 597 billion 12,734
Full Professor 78,830 62 441 billion 9,412
Attorney 69,104 42 413 billion 8,826
Engineer 68,294 40 411 billion 8,777
15
Comparison of Salary Growth by Occupational
Classification
Source 2001 AFT salary survey
16
Skill Level Measures

• ONET database
• A Job Zone is a group of occupations considered
  similar
• how most people get into the job
• overall experience needed to do job
• education needed to do job
• necessary on-the-job training
• Job Zone 1 little or no preparation
• Job Zone 2 some preparation
• Job Zone 3 medium preparation
• Job Zone 4 considerable preparation
• Job Zone 5 extensive preparation

• BLS National Compensation Survey
• Occupations are based on the Census of Population
  system
• Occupational Levels are ranked 1 through 15
• Sampling conducted in the field using PSO or PPS
• Leveling occurs in the field at each
  establishment, prior to data collection.

17
Comparison of Salaries by Skill Level for the
year 2000
18
Bureau of Labor StatisticsNational Compensation
Survey Data
19
BLS National Compensation Survey Data
20
BLS National Compensation Survey Data
21
BLSNational Compensation Survey Data
22
BLS National Compensation Survey Data
23
Comparison Across the Salary Distribution
Source 2000 ONet database
24
Flowchart I
3,480 stayed (60)
5,834 Non-Technical
2,354 left (40)
7,290 Secondary
863 stayed (59)
1,456 Technical
593 left (41)
4,852 stayed (74)
6,577 Non-Technical
1,725 left (26)
6,811 Elementary
164 stayed (70)
234 Technical
70 left (30)
25
Flowchart II
Retired
Secondary, Non-Technical 2,354 left (40)
Other Occupation
Retired
Secondary, Technical 593 left (41)
Other Occupation
Retired
Elementary, 1,795 left (26)
Other Occupation
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Teachers Who LeftWhere Did They Go?

• Elementary
• 26.06 - Service Industries
• 14.36 - Retail Trade
• 10.11 - College Teaching
• Other

Secondary

• Technical
• 15.79 - Service Industries
• 15.79 - College Teaching
• 10.53 - Business Services
• 7.37 - Retail Trade
• other

• Non Technical
• 17.63 - Service Industries
• 11.85 - College Teaching
• 11.85 - Retail Trade
• 9.25 - Business Services
• other

Source SASS
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Movement of Teachers to Other Occupations
Service Industries College Teaching Business Services Retail Trade Other
Elementary 26.06 10.11 6.35 10.11 47.37
Secondary Non-Technical 17.63 11.85 9.25 11.85 49.42
Secondary Technical 15.79 15.79 10.53 7.37 50.52
Source TFS 88-89, 90-91, 93-94
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COMPARISONS BY COMPETING OCCUPATION
29
Opportunity Costs of Teaching Relative to
Competing Occupations
Teacher Type Opportunity Cost
Elementary 20.19/hr
Secondary, Non-Technical 21.63/hr
Secondary, Technical 21.89/hr
30
Do Teacher Salaries Matter?

• Assumption compensation affects labor market
  decisions
• More talented teachers ultimately lead to better
  student outcomes
• But, theoretically, higher teacher salaries can
  have a perverse affect on teacher quality in the
  short-run
• Empirical work connecting salaries and quality
  shows mixed findings

31
Weak Evidence of Relationship Between Teacher
Salaries and Student Outcomes
32
Which Teacher Attributes Matter?

• The empirical results are startlingly
  consistent in finding no strong evidence that
  teacher student ratios, teacher education, or
  teacher experience have an expected positive
  effect on student achievement. (Hanushek, 1986).
• Resource variables that attempt to describe the
  quality of teachers (teacher ability, teacher
  education, and teacher experience) show very
  strong relations with student achievement.
  (Greenwald, et al, 1996).
• "Perhaps the closest thing to a consistent
  conclusion across studies is the finding that
  teachers who perform well on verbal ability tests
  do better in the classroom (Hanushek, 1989)

33
Teacher Quality Appears to be Primarily
Unobservable
Source Goldhaber, et al, 1996
34
Teacher Quality Appears to be Primarily
Unobservable
Source Goldhaber, et al, 1999
35
Teacher Salaries, Teacher Quality, and Student
Outcomes
?
?
Teacher Salaries
Teacher Quality
Student Outcomes
36
Why the Weak Link?

• Teachers may not respond to economic incentives
  (teaching is a calling)
• Rigid pay structure of teacher compensation may
  decouple compensation from relevant teacher
  attributes

37
Structure of Compensationin Education

• Single salary schedule
• Adopted in 1921 in Denver, CO and Des Moines, IA
• Places teachers on salary lanes based on degree
  and experience levels only
• Today over 95 percent of school districts use
  this pay structure
• Single salary schedule does not directly reflect
  labor market conditions, but we may still observe
  differentiation of salaries due to
• Sorting within district differentiation
• Sorting between districts

38
Structure Outside Education

• Labor market differentially rewards skills and
  productivity
• Large differences in salary by occupation
• Important recent changes under the surface
• Many occupations once closed off to women and
  minorities no longer are
• Returns to college quality and technical college
  skills (degree major) have increased
• There is an increasing return to graduating from
  a top college or university (Brewer et al, 1999)
• There is an increase in the gap (in entry level
  salaries) between education and technical majors
  (Grogger and Eide, 1995)

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Critiques of theSingle Salary Schedule

• Little link between pay and performance
• May enhance educational productivity
• No differentials based on expertise, training or
  job difficulty
• Little flexibility to place high quality teachers
  in difficult teaching environments
• Little flexibility to respond to labor market
  realities
• Throwing out of the managerial toolbox
• Limited ability to manage attrition and workforce
  demographics
• Loss of high quality teachers to administration
  and non-teaching occupations

40
Technical and Non-Technical Teachers
S
Wage
Wage
Equilibrium math wage
S
Single salary schedule wage
Equilibrium history wage
D
D
employment
Math Majors
History Majors
41
Starting Salary as a Function of SAT (Bachelors
Degree)
42
Simulated Opportunity Costs College
Selectivity 800

• Non-Technical Majors
• Teaching salary 27,461
• Non-teaching salary 27,272
• Opportunity cost 189

• Technical Majors
• Teaching salary 28,550
• Non-teaching salary 31,077
• Opportunity cost 2,527

43
Simulated Opportunity CostsCollege Selectivity
1200

• Technical Majors
• Teaching salary 29,443
• Non-teaching salary 32,631
• Opportunity cost 3,188

• Non-Technical Majors
• Teaching salary 28,320
• Non-teaching salary 28,636
• Opportunity cost 316

44
Alternatives to theSingle Salary Schedule

• Individual-Level Merit Pay Plans
• Reward teachers for individual performance
• School-Based Bonuses
• Reward schools for collective performance
• Competency/Contingency Pay Plans
• Reward individual teachers for acquiring skills
• National Board Certification

45
Conclusions

• Single salary schedule binds school districts
• Non-teacher labor market offers relatively larger
  returns to technical major, GPA, and college
  quality
• More research on importance of compensating
  differentials is necessary
• Experimentation is worthwhile
• Concurrent with more research on the impact of
  alternative compensation structures on the
  recruitment and retention of different types of
  teachers