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News from EPI Richwine/Biggs study on teacher compensation uses faulty methodology

For Immediate Release: Thursday, February 9, 2012
Contact: Phoebe Silag or Karen Conner, 202-775-8810

 Richwine/Biggs study on teacher compensation uses faulty methodology

 A recent paper arguing that teachers are overcompensated suffers from a series of methodological flaws, a new Economic Policy Institute analysis finds.  In Do public school teachers really receive lavish benefits? Richwine and Biggs’ recent report doesn’t make the grade, economist Monique Morrissey examines Assessing the Compensation of Public-School Teachers by Jason Richwine of the Heritage Foundation and Andrew Biggs of the American Enterprise Institute.  Morrissey focuses on the benefits component of teacher compensation; a forthcoming EPI study by Lawrence Mishel and Joydeep Roy will focus on the wages component.

Morrissey finds that the Richwine/Biggs study is at odds with a large body of research that shows that public school teachers, like other government workers, are not overcompensated.  She identifies a number of problems in their methodological framework, including the following:

  • Richwine and Biggs claim that they are bending over backward to compare the benefits of public-sector workers to those of better-paid private-sector workers—those working for large employers. However, public school teachers are very highly educated: 49% have a bachelor’s degree and 45% have at least a master’s degree. Though data limitations prevent a direct comparison to private-sector workers at large establishments (Richwine and Biggs’ comparison group), among private-sector workers at large firms, only 21% have a bachelor’s degree and 9% have a master’s degree.
  • In calculating the value of benefits, Richwine and Biggs use inconsistent measures.  They selectively alternate between the cost of benefits to employers and the value of benefits to workers.  They also inappropriately equate the value of benefits to workers with what it would cost individuals to obtain equivalent benefits in the individual insurance market.
  • Richwine and Biggs inflate public school teachers’ salaries by placing an arbitrary dollar figure on the value of job security.  Furthermore, in doing so, they ignore the advantage to employers of employee retention.
  • Richwine and Biggs overestimate the cost of retiree health benefits and seasonal leave.
  • Finally, Richwine and Biggs triple the cost of teacher pensions by assuming a very low rate of return on pension fund assets, or by assuming a very high cost of guaranteeing these benefits.

“The conventional wisdom happens to be correct: teacher pay is modest, with decent benefits barely making up for lower salaries,” Morrissey said.  “Richwine and Biggs do not prove that taxpayers are being overcharged, as they claim. If anything, by focusing on the higher cost to individuals of obtaining these benefits, they show that public-sector employers gets more bang for their buck.”

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