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In the Nation's Interest

Compensation Reform is Needed to Attract High-Quality Teachers

Strong teachers are key to improving the achievement of America's schoolchildren. Ensuring that every classroom is staffed with an effective teacher is a significant challenge, in no small part because the nation needs a lot of people to staff its schools. To attract enough high-quality individuals to the classroom, states and districts must rethink their compensation policies. Current pay and pension structures are out of sync with the realities of the 21st century labor market.

Public and private schools employed over 4 million teachers in 2008. These individuals come from the college-educated population, which numbered just over 45 million. Thus teachers accounted for 9 percent of college-educated workers. Since the teaching force remains predominately female (75 percent of teachers are women), 14 percent of the college-educated women in the labor force were working as teachers, compared to about 4 percent of men.

Historically, talented women and minorities had few professional opportunities outside teaching and a handful of other jobs. That situation, thankfully, has changed. Schools, however, must now compete for potentially high-performing college graduates.

Compensation policies are a problem here because financial rewards are skewed toward those individuals who enter teaching young and stay for a 25- or 30-year career. Current pay is based on "single salary schedules" that recognize primarily years of service and formal academic credits or degrees earned. Teachers depend for retirement income on defined-benefit plans that base benefits on years of service and average salary in the final years of teaching.

Research increasingly shows, however, that effective teaching does not require a lifetime on the job or advanced academic credentials. Teaching experience leads to better student achievement mostly in the early years of a teacher's career. Advanced degrees and credentials do not improve the ability of most teachers to raise their student's performance.

Moreover, today's college graduates frequently expect to be mobile and to be paid well if they perform well.

With schools needing to employ 9 percent of college graduates as teachers at any one time, they need a larger talent pool in order to raise teacher quality. They need compensation policies that will make teaching more attractive to more individuals at some point in their working lives. Instead of single salary schedules for determining current pay, school districts should embrace performance-based pay, pay linked to career paths, and labor-market-based pay.

Linking some part of teacher pay to effectiveness on the job would put teachers on a similar footing with other working professionals. Designing performance-based pay for schools presents important design challenges that must not be ignored, but reforms in a number of states and districts are beginning to provide valuable lessons about how to design and implement pay systems that include consideration of teacher performance.

Salary policies should also embrace new kinds of career paths for teachers based on qualitative and quantitative measures of their performance over time, so that effective teachers can remain in the classroom instead of having to leave for administrative positions in order to gain promotional opportunities and higher pay. And pay policies should include differentials that reflect the fact that some teachers have more career options outside of education than others and that some teaching assignments are harder to fill than others. Ignoring these labor market realities and paying all teachers the same tends to reduce the quality of teachers available for some jobs.

Pension policies must also be reformed to end penalties on mobile and short-term teachers so as not to discourage talented individuals who might be willing to spent some but not all of their careers in the classroom. Today teachers who move, especially across state lines, will find their ultimate pension benefits far lower than those received by teachers who work for the same number of years in one state. Furthermore, individuals who enter teaching young but do not work a full career in the profession actually subsidize the pension benefits of long-term teachers, compared to the pension wealth these "short-termers" might have earned under the benefit formulas that characterize cash balance or defined contribution pension plans. A cash balance plan, which is a defined benefit plan which accumulates benefits in terms of a stated account balance and promises fixed investment returns, is one among several options for redesigning defined-benefit pensions without abandoning them entirely.

Compensation is far from the only human capital practice that needs reforming in order to foster high-quality teaching. How teachers are recruited, educated, hired, supported on the job, and evaluated also matter a great deal. But compensation is a key element in an organization's strategy to acquire, increase and sustain the talent level of its employees. Current teacher compensation policies are not well-designed to address the needs of 21st century schools.

Commentaries are the views of the authors and do not necessarily represent policies of the Committee for Economic Development.