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. 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. 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. 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. 5 Individual and Institutional SAT Scores Data Source: Baccalaureate and Beyond ∆ =58 ∆ =42

6. 6 It’s Key to Attract and Retain High Quality Teachers Teacher Salaries Teacher Quality Student Outcomes

7. 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. 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. 9 It’s Complicated!

10. 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. 11 Relative to Other Occupations “We’re beginning to see a slight improvement in salaries, but it’s 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, they’re willing to pay good salaries to attract the best and brightest. It shouldn’t 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. 12 Starting Salaries in Teaching and Selected Other Occupations in 2000 (1) Source: AFT Salary Survey 2001

13. 13 Starting Salaries in Teaching and Selected Other Occupations in 2000 (2) Source: AFT Salary Survey 2001

14. 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 $133,900175%$597 billion$12,734 Full Professor $78,83062%$441 billion$9,412 Attorney $69,10442%$413 billion$8,826 Engineer $68,29440%$411 billion$8,777

15. 15 Comparison of Salary Growth by Occupational Classification Source: 2001 AFT salary survey

16. 16 Skill Level Measures O*NET 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. 17 Comparison of Salaries by Skill Level for the year 2000

18. 18 Bureau of Labor Statistics: National Compensation Survey Data

19. 19 BLS: National Compensation Survey Data

20. 20 BLS: National Compensation Survey Data

21. 21 BLS:National Compensation Survey Data

22. 22 BLS: National Compensation Survey Data

23. 23 Comparison Across the Salary Distribution Source: 2000 O*Net database

24. 24 Flowchart I 5,834 Non-Technical 4,852 stayed (74%) 1,456 Technical 1,725 left (26%) 3,480 stayed (60%) 2,354 left (40%) 863 stayed (59%) 593 left (41%) 164 stayed (70%) 70 left (30%) 6,577 Non-Technical 234 Technical 6,811 Elementary 7,290 Secondary

25. 25 Flowchart II Secondary, Non-Technical 2,354 left (40%) Secondary, Technical 593 left (41%) Elementary, 1,795 left (26%) Retired Other Occupation

26. 26 Teachers Who Left: Where Did They Go? 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 Elementary 26.06% - Service Industries 14.36% - Retail Trade 10.11% - College Teaching Other Secondary Source: SASS

27. 27 Movement of Teachers to Other Occupations Service Industries College Teaching Business Services Retail Trade Other Elementary26.06%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% 10.53%7.37%50.52% Source: TFS 88-89, 90-91, 93-94

28. 28 COMPARISONS BY COMPETING OCCUPATION

29. 29 Opportunity Costs of Teaching Relative to Competing Occupations Teacher TypeOpportunity Cost Elementary$20.19/hr Secondary, Non- Technical $21.63/hr Secondary, Technical$21.89/hr

30. 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. 31 Weak Evidence of Relationship Between Teacher Salaries and Student Outcomes

32. 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. 33 Teacher Quality Appears to be Primarily “Unobservable” Source: Goldhaber, et al, 1996

34. 34 Teacher Quality Appears to be Primarily “Unobservable” Source: Goldhaber, et al, 1999

35. 35 Teacher Salaries, Teacher Quality, and Student Outcomes Teacher Salaries Teacher Quality Student Outcomes ? ?

36. 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. 37 Structure of Compensation in 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. 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)

39. 39 Critiques of the Single 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. 40 Technical and Non-Technical Teachers Wage employment Single salary schedule wage Math MajorsHistory Majors D D S S Equilibrium math wage Equilibrium history wage

41. 41 Starting Salary as a Function of SAT (Bachelor’s Degree)

42. 42 Simulated Opportunity Costs: College Selectivity = 800 Technical Majors Teaching salary: $28,550 Non-teaching salary: $31,077 Opportunity cost: $2,527 Non-Technical Majors Teaching salary: $27,461 Non-teaching salary: $27,272 Opportunity cost: $189

43. 43 Simulated Opportunity Costs: College 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. 44 Alternatives to the Single 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. 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