How Much Do Schools Really Pay?

Commentary

How Much Do Schools Really Pay?

A number of research studies show that teacher salary is not systematically related to teacher quality. A teacher’s salary is directly to linked to classroom experience; however, the benefits of classroom experience on teacher performance level off after five to seven years.

This means the teacher’s experience is a better indicator of the teacher’s salary than the teacher’s productivity.

Salary alone, however, does not tell the whole story. A recent paper by the Manhattan Institute, based on an analysis of the 10 largest US public school districts, finds that including pension benefits in the total compensation calculation further increases the premium paid to highly experienced teachers. Because of the “backloaded” structure of these districts’ pension plans, long-tenured teachers who remain in the same school district throughout their entire careers accumulate substantially larger benefits than their shorter-tenured counterparts.

The paper also finds that switching to a cash-balance plan that maintains the same level of total compensation would smooth retirement benefits and bring about a compensation structure more in line with teacher quality.

To read the full paper, go here.

Truong Bui is a policy analyst at Reason Foundation, where he works on the Pension Reform Project.