| December 5, 2011

Are Public School Teachers Underpaid?

My colleague at The Heritage Foundation, Jason Richwine, along with co-author Andrew Biggs of the American Enterprise Institute (AEI), has published a groundbreaking new paper on teacher compensation. The authors find that public school teachers “make total compensation 52 percent greater than fair market levels, equivalent to more than $120 billion overcharged to taxpayers each year.”

Bob Costrell, the discussant at the public event at AEI last month to present the findings, noted that Richwine and Biggs’ research significantly contributes to the existing literature on teacher compensation. In doing so, it shatters three myths that have driven policy in the wrong direction for decades.

Myth No. 1: Teachers are constantly tempted to leave the classroom for high-paying private-sector jobs. We’re told that teachers are tempted into higher-paying professions; that it is a teacher’s sense of commitment, not high compensation, which tethers them to the classroom. Teachers, as former AFT president Sandra Feldman once argued, “are being lured to other professions with handsome salary offers.” The NEA’s Kim Anderson even responded to the Richwine/Biggs study by stating that “talented individuals turn away from this rewarding profession because they are forced to choose between making a difference in the lives of students and providing for their families.”

For the average teacher, however, this isn’t the case. Switching from a non-teaching job to a teaching job increases workers’ wages, on average, by 9 percent; transitioning from teaching to non-teaching, by contrast, results in a wage decrease of 3 percent. As Richwine and Biggs observe, it’s “the opposite of what one would expect if teachers were underpaid.”

Which brings us to myth number two …

Myth No. 2: Teachers are underpaid. Richwine and Biggs’ finding that teachers are paid above market value runs contrary to what we so often hear—that teachers are, to quote Secretary of Education Arne Duncan, “desperately underpaid.”

While it’s true that public school teachers earn less, on average, than similarly credentialed non-teachers, Richwine and Biggs note that traditional skill measures, such as years spent in school or level of degree, do not lend themselves to an accurate salary comparison of teachers to non-teachers. The “wage gap” disappears when teachers and non-teachers are compared using objective measures of cognitive ability, as opposed to years of university education.

Beyond paper qualifications, comparisons of public school teachers to their private-school counterparts provide more evidence that public school teachers are compensated above market value. The authors find that “with all observable skills held constant, public-school teachers nationally earn 9.8 percent more in salaries than private school teachers.”

But it’s the benefits that are the biggest factor. Biggs notes in National Review Online:

“The BLS benefits data, which most pay studies rely on, has three shortcomings: It omits the value of retiree health coverage, which is uncommon for private workers but is worth about an extra 10 percent of pay for teachers; it understates the value of teachers’ defined-benefit pensions, which pay benefits several times higher than the typical private 401(k) plan; and it ignores teachers’ time off outside the normal school year, meaning that long summer vacations aren’t counted as a benefit. When we fix these problems, teacher benefits are worth about double the average private-sector level.

“Finally, public-school teachers have much greater job security, with unemployment rates about half those of private-school teachers or other comparable private occupations. Job security protects against loss of income during unemployment and, even more importantly, protects a position in which benefits are much more generous than private-sector levels.”

When considering the benefits public school teachers enjoy—job security, health benefits, and plush pension packages—the “totality of the evidence” suggests that teachers are not underpaid, and are actually, overpaid.

Myth No. 3: We aren’t attracting enough teachers. Well, myth number three is actually a half-myth. During the AEI discussion, Costrell also pointed out that the median number of qualified applicants per teaching position is 15:1. So while there is actually excess supply, there is wide variation by field. While there are only four applications for every available speech and language pathology position, there are 129 applicants for every elementary (K-6 teacher) position.

Teachers should be paid fair market wages, but the current system prevents teachers from being rewarded based on their performance.

Research shows that teacher quality is one of the most important factors in increasing student achievement. Effective teachers should be handsomely rewarded for the impact they are having on a child’s education. By reforming compensation policies in a way that accounts for the abilities of great teachers to improve student outcomes, we will ensure excellent teachers are richly compensated, and mediocre teachers have a strong incentive to improve.

Lindsey M. Burke is a senior policy analyst at The Heritage Foundation.

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