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Long-stagnant teacher compensation needs to be upgraded

The pay gap between teachers and similarly skilled professionals has expanded over the last few decades. We must reform the system to attract and retain the most effective teachers.

November 14, 2011|By Michael Greenstone and Adam Looney

A good teacher can transform the lives of children. But most U.S. school districts have insufficient tools to encourage effective teaching.

The country is in the midst of a 30-year period of stagnation in student achievement. One of the things that could help turn things around is a new approach to how teachers are paid, one specifically aimed at attracting the best applicants and encouraging the most effective teachers to stay.

Great teachers not only transmit knowledge and passion, they also impart important attitudes about learning and teach valuable life skills that directly contribute to success later in life. For example, new evidence shows that having an above-average kindergarten teacher rather than a below-average one translates into a difference of more than $300,000 in lifetime earnings for a classroom of 20 students.

Unfortunately the current system doesn't make it easy to attract, recruit and retain effective teachers. In most states, public school teachers must have credentials that require a year or more of additional course work after college. Yet they step into jobs with relatively low salaries and considerable insecurity in these times of shrinking public budgets. That's why many reformers are calling for market-based approaches to fixing schools.

Let's start with compensation.

The Hamilton Project recently undertook an analysis of teacher salaries and found that they have been stagnant over the last three decades, while salaries for similarly skilled workers in other professions have increased. In the 1970s, teachers made about 7% less than non-teachers with similar education, experience and other characteristics, or about $3,800 per year in inflation-adjusted terms. Over the last decade, that pay gap has increased to about 19%. Today's teachers make about $11,000 less in annual earnings than other professionals with similar backgrounds.

This gap in pay is among the largest in the developed world, according to a recent report by the Organization for Economic Cooperation and Development comparing salaries of teachers with the average earnings of full-time workers with similar training and skills. Of the 27 countries studied, the United States ranked 22nd, demonstrating a more significant pay gap between teachers and non-teachers than in most other industrialized nations.

Of course, salaries are just one component of compensation, and public school teachers generally receive more favorable health and retirement benefits than do private-sector professionals. But whether these benefits have increased enough to offset the relative decline in wages is unclear from the available data.

More important, costly, backloaded benefits are not necessarily the best tools for attracting and retaining the most effective teachers. As one example, the pension plans available to most teachers today require that they stay in their school system for a long period of time to vest for retirement. Therefore, young teachers who enter the profession for a limited number of years or who want to change school districts will not reap the backloaded benefits in the current structure. This approach to compensation is out of step with the private market, which is competing for the same pool of talented individuals and can offer higher salaries and mobile retirement plans that allow for greater flexibility and near-term rewards.

Over the last three decades, educational attainment and achievement in the United States have stagnated and contributed to a decline in earnings for many Americans. Our current system is falling short, and it is increasingly clear that our approach to teacher compensation needs to be updated. There are several necessary components of such change, including the difficult task of identifying the teachers who spur higher student achievement. A key complement to such strategies is to reform teacher compensation policies to attract a broader pool of applicants to the profession and then pay the best teachers salaries that provide them with an incentive to remain in the profession.

Teachers play a crucial role in shaping our children and in this respect hold our nation's future in their hands. As we look to fill as many as 4 million teaching openings in the coming decade, we must reform our compensation systems to attract and retain the most effective teachers. If we fail to do so, we should not be surprised by the results.

Michael Greenstone is director of the Hamilton Project at the Brookings Institution and an economics professor at MIT. Adam Looney is policy director for the Hamilton Project and a senior fellow at the Brookings Institution. More of their research can be found at

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