Economics 147

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Economics 147

• Winter 2005
• Lecture 15

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Outline for today

• School choice spectrum
• Tax treatment of private schooling
• Regulation of charters and vouchers
• Markets for teachers

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Summary a variety of forms of school choice

• Pure Tiebout you choose where to live
• All attend neighborhood school
• More choice Allow intradistrict choice of
  public school (magnets, charters, voluntary
  busing)
• Allow interdistrict choice of public school
• Private school choice options
• voucher, subsidy, tax credit, tax deduction

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Types of charter/voucher plans
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continued
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Types of tax plans

• Income tax rate t applied to income Y
• Tax payment tY
• Tax deduction for tuition t
• Tax payment t(Y - t)
• Tax credit for tuition t
• Tax payment (tY) - t

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Education Savings Account

• New for K-12 in 2001, works like Roth IRA
• 1st pay income taxes tY on income
• Put up to max allowable post-tax income (2000)
  in educ savings acct
• Earn interest tax-free on that income provided
  you use it for tuition
• Normally would be taxed on interest earnings
• Phases out at very high income (190k if married)

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The market for teachers

• Today
• General model supply and demand
• Confounding factors
• Difficulties in assessing teacher productivity
• Artificially compressed salary schedules (unions)
• Compensating wage differentials
• Who teaches?
• Next class
• Policy approaches to fixing teacher labor market
• Teacher mobility responses to wage and non-wage
  compensation

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Labor market equilibrium

• The good is a worker
• Supply curve quantity of workers (employment
  level) willing to work for a given price (wage)
• If we pay more, what will we get?
• Demand curve quantity of workers demanded by
  firms for a given price
• How much should we be willing to pay?
• Equilibrium supply demand!

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Labor market equilibrium
wage P
S
W
D
E
Employment level Q
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Supply-side factors

• What is the cost of being a teacher?
• Direct costs
• Education for credential, licensing, testing
• Opportunity costs
• Outside options have improved for women and
  minorities
• Corcoran, Evans and Schwab reading
• Outside options differ by subject taught
• What are the benefits of being a teacher?
• Wage compensation
• Benefits (health insurance, vacation, etc.)
• Job satisfaction and other amenities

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Average annual salary for public elementary and
secondary school teachers
Source Digest of Education Statistics, 2002.
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Working conditions
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Demand-side factors

• Firms set MB of input MC of input
• MB for private sector firm
• marginal product price of product
• What is MB for school?
• Hard to observe marginal product (achievement)
• Hard to value with dollar amount
• MC wages benefits

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San Diego Unified School District, 2003
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Intersection of supply and demand

• Who teaches?

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Who teaches? Gender
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Who teaches? Age
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Who teaches? Race
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Who teaches? Major certification
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Table I. Decline in Proportion that Teach
Fraction College-Educated Population in Teaching.
Source Bacolod, 2003.
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Table I. Decline in Proportion that Teach
Fraction College-Educated Population in Teaching.
Source Bacolod, 2003.
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Table II. New Entrants to Teaching, by
EducationFirst row Fraction in Teaching, With
Some CollegeSecond row Fraction in Teaching,
CollegeSource Bacolod, 2003.
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Table II. New Entrants to Teaching, by
EducationFirst row Fraction in Teaching, With
Some CollegeSecond row Fraction in Teaching,
CollegeSource Bacolod, 2003.
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Corcoran, Evans and Schwab

• Evidence of a slight but detectable decline in
  the relative ability of the average new female
  teacher (emphasis added)
• Decline in entry to teaching is greater for women
  with test scores at the top of the distribution
  than for those in the middle