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September 2014 Policy Study, Number 14-5


Terry Moe's Special Interest: Teachers Unions and America's Public Schools


Chapter 5 – Are Teachers Underpaid?



“Teachers are underpaid.”  Union leaders and their public relations experts have been hammering the point home, working it into stump speeches, and enshrining it as among the most serious problems of American education for several decades now.  Most Americans – including those in influential positions – seem to have gotten the message, making it part of the conventional wisdom of modern American culture.


But the salary numbers the unions roll out are invariable based on annual salaries, and they conveniently ignore the other components of the compensation package.  The fact is, teachers are compensated in many ways: through salaries, yes, but also through defined-benefit pension programs, health care insurance for active employees, health care insurance for retirees, tenure, summers off, flexible work schedules, health care buy-outs, and more.  Taken together, these components add up to a compensation package that is clearly very valuable.  While exact estimates of its monetary value are not currently possible, it is surely much higher than annual salary figures suggest.  It is higher than most academic studies suggest as well, for the research on the subject ignores or understates important aspects of how teachers really get “paid.”  The value of tenure, for instance, which is clearly substantial, is never taken into account at all, nor is the underfunding of pensions and retiree health benefits, nor is the insulation from risk that defined-benefit pensions and retiree health benefits provide.


I am not saying that teachers are rich.  The thrust of my argument is simply this: teachers are much better compensated than people tend to think.  Most aspects of teacher compensation are overlooked, and they need to be recognized if citizens and policymakers are to have a good sense of how well teachers are actually “paid.”


Whether teachers should be better compensated is another question.  It does no good to stare at salary levels, or even estimates of total compensation, and complain that they are “too low” – because there are no criteria or standards of comparison to allow for such a conclusion.  Too low compared to what?  And if we put the focus on how teachers compare to other professionals, not much is really gained.  Those professions involve different skills and educational backgrounds from teaching and are typically occupations that few teachers could transfer into anyway.  Moreover, it is well documented that, over the last few decades, the people going into teaching have increasingly been drawn from the lower strata of college graduates – as measured, for instance, by scores on the Scholastic Assessment Test – and thus, in terms of intelligence and academic achievement, they lag behind the people who go into many of these other fields (on average).[5]  Why should a teacher get paid that same as a computer programmer?  There is little rationale for claiming that she should.


The appropriate way to approach compensation is in terms of productivity.  In economic analysis, an organization allocates its resources efficiently by paying its workers based on their productivity – that is, based on how much they contribute to the organization’s goals (in the case of business firms, profit).  The greater an employee’s value added, the greater the pay.  If the same reasoning were applied to schools – and it should be – then the proper level of teacher compensation, taking all of its components into account, would depend on how much individual teachers contribute to student learning and other educational goals.  It is difficult to monetize those goals, of course, but the principle is clear: compensation needs to be hooked to productivity if schools are to use their resources efficiently in the best interests of children.  Highly productive teachers should be better compensated than less productive teachers (many of whom should be dismissed).  And overall spending on compensation needs to be assessed in terms of other ways the money could be spent (on buildings, computers, books, distance learning opportunities, and so on) and the relative contributions these options might make to productivity.  More compensation for teachers may have positive outcomes for children – research on the subject is in fact mixed and suggests that the connection is weak[6] – but spending the money in other ways may be more productive still.  The idea is not to single-mindedly pour money into salaries and benefits.  It is to find the right balance, so that school resources are allocated across alternative uses to yield the most efficient outcome for kids.


This kind of reasoning, however, is foreign to the way teacher compensation is actually handled.  In the real world of public education, it is handled through power.  The unions use their power in collective bargaining and legislatures to push for as much teacher compensation – in all its forms – as they can get.  And they try to see to it that resources are not used in other ways.  Productivity has nothing to do with it.  For any type of organization, this is a formula for poor performance.




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