How To Improve California’s Poorly Performing Education System? Reforming Antiquated Teacher Compensation Practices Will Have A Big Effect

Tuesday, September 11, 2018
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In a market economy, employee compensation inevitably depends on employee performance and productivity. But there is one incredibly important occupation in which compensation depends very little on performance—public school teaching. In California, as well as many other states, teacher compensation is largely tied to seniority and the completion of various certification and summer teacher enrichment programs, rather than to teaching performance. Moreover, teacher compensation typically does not reflect market pressures for teachers across different teaching fields. In particular, compensation for teachers in the difficult-to-fill STEM teaching areas is often the same as in areas that do not have the same scarcity. This makes it very difficult to hire and retain qualified math and science teaching specialists.

So why is the compensation process so different for K–12 teachers? Teachers unions. Old-school unions (think of the United Auto Workers and the United Steel Workers from the 1950s) have always created salary compression, which implicitly means raising pay—sometimes considerably—for less productive workers in the union, at the expense of restricting pay for the most productive workers.

Treating individuals within the union as essentially the same worker goes back in time to an economy that simply no longer exists, back to the days when US Steel ruled the world of steel production, and the United Steel Workers seemed to call a strike after the expiration of every collective bargaining agreement. With only about 6 percent of private sector workers remaining in unions today, and with productivity and performance now central in many union negotiations, teacher unions are now one of the last outposts in the United States resisting merit-based pay.

California typically ranks near the bottom of US educational statistics, as only 37 percent of California students are proficient at mathematics despite much higher state spending on K–12 education. It is clear that California needs to make educational reforms, so why are teacher unions resisting a principle that works well in the rest of the economy? Unions list several reasons, such as (1) merit-based pay introduces competition into teaching and this would ruin a collaborative and collegial workplace, (2) merit-based pay will lead all teachers to teach the same way, and (3) it is inherently difficult to evaluate teaching performance.

Do these explanations ring true? Regarding (1), most effective workplaces exhibit both collegiality and performance-based pay, and this includes teachers at community colleges, colleges, and universities. Regarding (2), if there are clear best practices in teaching, then we should hope that they will be adopted broadly. Regarding (3), teachers are evaluated when they are hired, and they are evaluated for their tenure decision. In fact, just ask any parent whether they can distinguish between effective and ineffective teachers. Note that any union argument to justify decoupling K–12 teaching compensation from teacher performance must make the case that either the occupation itself, or that the teachers themselves, fundamentally differ from their counterparts in the rest of the economy and that the market principles of supply and demand don’t apply to teaching. If you don’t buy this, then you are not alone.

California teacher unions constitute much of the resistance to pay for performance in K–12 teaching. The politically powerful 325,000 member California Teacher Association stated that “Merit pay is flawed in concept. Where it has been tried, it has proved to be a detriment rather than a stimulus to better education.” Detriment to better education? Really? Vanderbilt University researchers recently conducted a meta-analysis of forty-four studies and concluded that merit-based pay increases student learning by nearly one month per academic year. Other research shows that teacher pay on average is higher in school districts with merit pay and that teaching collegiality is not compromised. What is not to like here? Students, parents, taxpayers, and many—perhaps most—teachers benefit.

The long-run gains of merit pay may be even much higher by changing the future composition of teachers. Research by economists Caroline Hoxby and Andrew Leigh show that fewer extremely high-performing individuals are entering the teaching profession today compared to the 1960s and that much of this decline is explained by union salary compression. That is, high-performing individuals don’t enter the teaching profession at the same rate as they used to because they won’t be paid what they are worth. In complementary research, economists Kevin Lang and Maria Dolores Palacios show that teaching is now attracting individuals who are extremely risk averse, meaning that they value job security (provided by teacher tenure) much more than other workers in the economy. For these workers, being able to keep your job is a very attractive component of the teaching profession, perhaps more so than the attractiveness of the actual teaching job itself.

The best teachers are incredibly valuable, and California needs many more of them. Research by Harvard economist Raj Chetty shows that one year with a high performing teacher, compared to an average teacher, can mean as much as $250,000 in additional lifetime income for a classroom of students. And research by Stanford economist Rick Hanushek shows that high-performing teachers are effective even in classrooms with a large number of students. It is hard to imagine a better investment for our state than paying teachers according to their performance. These reforms are ours for the taking, but unfortunately gubernatorial front-runner Gavin Newsom is solidly aligned with the state’s teacher unions. He has received enormous political contributions from these unions during his political campaign, just as many Democratic party candidates have in the past.

At some point, the pressure for market-based economic reforms in California education will become too powerful for politicians and unions to sweep under the rug. The faster that we demand change, the sooner we will see reforms. But until then California will continue to provide an unsatisfactory education to many of our children.