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Redesigning Teacher Pay: A System for the Next Generation of Educators

Redesigning Teacher Pay: A System for the Next Generation of Educators

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EPI Series on Alternative Teacher Compensation Systems • No. 2
Series editors: Sean P. Corcoran and Joydeep Roy

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Table of Contents

Introduction by Sean P. Corcoran and Joydeep Roy

PART I: TEACHER PAY-FOR-PERFORMANCE: A framework for program design
1.1 Introduction
1.2 Teacher Compensation: An Overview
1.3 Pay-for-Performance: A Framework of Approaches
1.4 Pay-for-Performance in Practice
1.5 Conclusion

PART II: PAY AND CAREER DEVELOPMENT: A proposal for a new generation of teachers
2.1 Introduction
2.2 Setting the Stage
2.3 The Tiered Pay-and-Career Structure
2.4 Learning and Development Fund
2.5 Local Incentives and Awards
2.6 Implementing the Plan
2.7 Conclusion


by Sean P. Corcoran and Joydeep Roy

School reform efforts in the United States have increasingly come to focus on the identification, recruitment, motivation, and retention of highly effective teachers. This renewed emphasis on teaching and the teaching profession came to national awareness when, in 2009, the Bill and Melinda Gates Foundation announced it was phasing out its large investment in small high schools, and instead turning its attention toward teacher quality.1 President Obama has also indicated a strong desire to improve teacher quality in the public schools, mostly through reforming teacher compensation. In a March 10, 2009 speech, for example, he stated: “It’s time to start rewarding good teachers, [and] stop making excuses for bad ones” (New York Daily News 2009). On July 24, 2009 he went further, adding that rewards should be based on test scores: “Success should be measured by results,,,That’s why any state that makes it unlawful to link student progress to teacher evaluations will have to change its ways.”2

School districts have long paid teachers according to the “single salary” schedule, a fixed pay schedule based primarily on education and years of experience. A new conventional wisdom among education reformers has emerged suggesting that this system is outmoded (Hassel 2002; Solmon 2005; Vigdor 2008). The traditional system, reformers argue, fails to attract our best college graduates into teaching and provides practicing teachers no incentives to produce results. In response, a number of states and school districts have begun experimenting with “pay-for-performance” plans, where teachers are compensated at least in part for their contribution to students’ standardized test scores.

The EPI series on Alternative Teacher Compensation Systems is aimed at informing the different stakeholders in education—policy makers, school officials, teachers, parents, and the general public—of the nature and consequences of instituting pay-for-performance in education. The series brings together experts from education and the social sciences to analyze key aspects of these policies.

The first report in this series (Adams, Heywood, and Rothstein 2009), published earlier this year, looked at the use of performance-based compensation and evaluation outside of education. In that report, economists Scott Adams and John Heywood argued that performance-based pay tied to narrow measures of job performance are not nearly as ubiquitous as common wisdom suggests. Formulaic rewards based on narrow quantitative indicators—like the ones often proposed by education reformers—are important in only a small fraction of professional occupations and are concentrated in real estate, sales, and especially the financial sector (which in retrospect has not worked out so well). Richard Rothstein highlighted pervasive evidence of distortions and gaming behaviors in other sectors of the economy, both public and private, that have relied on strict quantity indicators for pay-for-performance to improve outcomes. Rothstein concluded that such problems are particularly severe in sectors like education, where output is difficult to measure and collaboration is essential.

This volume—the second in our series—consists of two studies by Susan Moore Johnson and John Papay, both of the Harvard Graduate School of Education. In this volume, Johnson and Papay provide a simple framework for comparing, designing, and evaluating pay-for-performance plans in education. This framework, motivated by research in economics and psychology on the impact of incentives on worker behavior, is applied to several well-known performance pay plans currently used in large urban school districts in the United States. It is frequently hard to discuss issues around pay-for-performance because there is no common language for understanding the various types of plans. We believe that Johnson and Papay have advanced the discussion by bringing some analytic clarity to current practices. They also offer their own novel proposal for reforming teacher compensation. This proposal—while a significant departure from the single salary schedule—avoids many of the problems raised by Adams, Heywood, and Rothstein that arise in plans singly focused on test scores. On the contrary, Johnson and Papay take a much longer-run view, offering a career-based plan that is uniquely aimed at improving human capital in the teaching profession.

The latest teacher pay reforms go by many names—differentiated pay, pay-for-performance, professional compensation, merit pay, and performance-based pay. In the first study, “Teacher Pay for Performance: A Framework for Program Design,” Johnson and Papay tackle “pay-for-performance,” the class of pay reforms that offer bonuses for effective teaching performance as evidenced by formal evaluations or student test scores. These programs differentiate pay for teachers based on their success in the classroom, rather than for their knowledge and skills, their roles, or assignment.

Johnson and Papay provide a simple, yet rich analytical framework that allows one to clearly identify the dimensions on which pay-for-performance plans differ. Their framework centers on the three most important questions districts must answer when designing such a plan: (1) which measures will be used in assessing performance— standardized tests, professional evaluation, or a combination of both; (2) whether to identify top performers using relative rankings or a fixed standard; and (3) whether to provide awards at the individual or group (e.g., school) level. Each of these critical decisions affects teacher incentives in unique, often conflicting, ways. Building upon these three dimensions, Johnson and Papay classify 12 main “types” of pay-for-performance programs, each with its own
strengths and weaknesses.

Although the design elements of a pay-for-performance scheme play a vital role in its success, a variety of other factors, and in particular the local context and process of implementation, also matter a great deal. Johnson and Papay complement their theoretical discussion with illustrative examples of pay-for-performance programs in four large, urban districts—Houston, Texas; Minneapolis, Minnesota; Charlotte-Mecklenburg, North Carolina; and Hillsborough County, Florida—all of which provide substantial awards for teacher performance. These four districts have all been at the forefront of teacher pay reform, and have committed substantial amounts of money to performance bonuses. Notably, none of their plans is focused on a single measure of student performance. Rather, each district incorporates several complementary programs in their overall compensation strategy. Each district also includes components from broader state incentive programs, but their implementation is very much tailored to local needs.

The wide variation in current pay-for-performance programs suggests that successful design and implementation depends in large part on the local context. Diversification can help make a program politically feasible by satisfying multiple stakeholders, and can also reward teachers for undertaking a wide range of important behaviors, lessening incentives to focus on narrow (but rewarded) tasks. On the other hand, too many overlapping programs can obscure the educational goals of the district. Johnson and Papay note that, for the most part, too many districts have simply appended performance pay components to their current pay system. They suggest that performance-based pay should instead be part of a well-conceived human capital strategy for developing teachers through all stages of their career.

This volume’s second study, “Pay and Career Development: A Proposal for a New Generation of Teachers,” is an example of such a strategy. In this section, Johnson and Papay propose to replace the single salary scale with a career-oriented compensation system that is aligned with school districts’ strategies for developing human capital. This system, dubbed the “Tiered Pay-and-Career Structure,” is designed to attract strong candidates to teaching, to support them in developing instructional skills throughout their career, and to provide substantially higher pay to those who perform well and assume broader responsibility for improving instruction beyond their classroom.

This new proposal is motivated by the needs of students and schools today, particularly those in low-income communities. It would not only attract and retain effective individuals as classroom teachers and administrators, but go beyond these goals to increase the instructional capacity of the schools themselves. With a focus on increasing the all-around success of students, it encourages and rewards teachers for effective instruction, ongoing learning, successful leadership, and sustained commitment.

Johnson and Papay’s proposed system has at its core a tiered pay and career structure designed to improve the instructional capacity and performance of all teachers. This central core is supplemented by a novel Learning and Development Fund, created through the diversion of resources from the lanes of the existing single salary schedule. The Learning and Development Fund ensures that funds are available to finance learning opportunities and new roles for teacher leaders. Districts can also use the Learning and Development Fund to address immediate needs by offering stipends for special staffing assignments, or they can initiate specific programs to capitalize on outside funding opportunities, such as performance awards for schools.

Districts that implement the Tiered Pay-and-Career Structure and Learning and Development Fund will fundamentally change how they recruit, compensate, assess, and develop teachers. As a result, their schools should attract better and more motivated teachers, achieve greater stability in its workforce, and witness improved student performance. Importantly, the plan avoids isolated bonuses for one-time successes and instead builds an integrated strategy for advancing a wide range of human capital goals. These goals include recruiting skilled teachers as well as teachers in hard-to-staff fields; ensuring that all schools and students benefit from effective teachers; promoting ongoing professional growth that is aligned with the schools’ goals; and retaining and developing teacher leaders. As districts implement and build on this plan, teachers and the public can assess the results and better understand how a comprehensive pay system can support school improvement.

It is increasingly clear that the single-salary schedule must be re-designed for a new generation of teachers. Experimentation with performance-based pay is now widespread, with plans in place in Texas, Minnesota, Florida, Alaska, Iowa, North Carolina, Missouri, Kentucky, and other states. President Obama has announced his intention to significantly expand performance-based pay through the federal Teacher Incentive Fund, which would, under his proposal, increase in size from $97 to $483 million (Washington Post 2009).

Our understanding of the short- and long-run implications of these pay schemes is, however, quite incomplete. With most teacher pay reforms only a few years old, it is still too early to empirically evaluate their effects on achievement and the labor market for teachers. The two studies in this volume go a long way toward identifying the dimensions of pay-for-performance that deserve greater attention from researchers and policy makers. Johnson and Papay’s new framework for teacher compensation constitutes a bold departure from the single-salary schedule that nevertheless builds on its strengths. They propose a system that is much more than a narrow formula linking pay to student outcomes, in which teachers themselves are relatively interchangeable. On the contrary, Johnson and Papay envision a comprehensive and integrated human capital system in which instructional goals are carefully aligned with teacher recruitment, development, and retention. The authors are acutely aware of the many professional opportunities facing our most talented college graduates, and have structured a career-oriented plan capable of competing with these opportunities.

The next volume in this series will analyze ways to improve the quality of the teaching force in this country, with a focus to using compensation policy to achieve this goal.

1. 2009 Annual Letter from Bill Gates, U.S. Education: annual-letter/Pages/2009-united-states-education.aspx [last accessed July 8, 2009].

2. Remarks by the President on Education, July 24, 2009, press_office/Remarks-by-the-President-at-the-Department-of-Education/ [last accessed July 28, 2009].

Adams, S., J. Heywood, and R. Rothstein. 2009. Teachers, Performance Pay, and Accountability: What Education Should Learn From Other Sectors. Washington, D.C.: EPI.

Hassel, B. 2002. Better Pay for Better Teaching. Progressive Policy Institute. Washington, D.C.: PPI.

New York Daily News. 2009. President Obama education plan calls for performance-based pay, firing poor performing teachers. March 11. politics/2009/03/10/2009-03-10_president_obama_education_plan_calls_for-1.html

Solmon, L. C. 2005. Recognizing differences. Education Next. Vol. 5, No. 1, pp. 16-20.

Vigdor, J. 2008. Scrap the sacrosanct salary schedule. Education Next. Vol. 8, No. 4, pp. 36-

Washington Post. 2009. Best in class. July 1. article/2009/06/30/AR2009063003183.html. Last accessed: July 8, 2009.

Sean P. Corcoran is an assistant professor of educational economics at New York University’s Steinhardt School of Culture, Education, and Human Development.

Joydeep Roy is an economist at the Economic Policy Institute. His areas of focus include economics of education, education policy, and public and labor economics.

About the Authors

Susan Moore Johnson is the Pforzheimer Professor of Teaching and Learning at the Harvard Graduate School of Education, where she served as the academic dean from 1993 to 1999. As director of the Project on the Next Generation of Teachers, Johnson studies teachers’ work and careers. She has published her research in books and journals, including Educational Evaluation and Policy Analysis, American Educational Research Journal, and Teachers College Record. Johnson is a member of the National Academy of Education.

John P. Papay is an advanced doctoral student in the Quantitative Policy Analysis in Education concentration at the Harvard Graduate School of Education and a research assistant with the Project on the Next Generation of Teachers. A former high school history teacher, his research interests include teacher policy, the effects of educational policies, teacher labor markets, and teachers unions.

EPI appreciates the Ford Foundation—and Fred Frelow in particular—for supporting the research in the Economic Policy Institute’s Series on Alternative Teacher Compensation Systems.

All of the authors of this volume want to express their gratitude to the Economic Policy Institute’s publications staff—department director Joseph Procopio, editor Ellen Levy, and designer Sylvia Saab—for their dedication and hard work in the launching of this new EPI book series.

We are indebted to the district officials and teachers union representatives who spoke with us about current pay-for-performance initiatives in Houston, Hillsborough County, Charlotte-Mecklenburg, and Minneapolis. Their willingness to describe their programs in detail and to comment on the history and development of pay for performance in their district provided important insights for our analysis. We are grateful to Lawrence Mishel, who conceived of this project and invited us to participate. We also thank Sean Corcoran and Joydeep Roy for their ongoing assistance and helpful comments on earlier drafts. In addition, we benefited from the thoughtful critique and suggestions of several anonymous reviewers.

Our work is informed by our colleagues at the Project on the Next Generation of Teachers and the past efforts of policy makers, administrators, and teachers to align the incentives of pay systems with the goals of schooling. We have learned a great deal from the research and analysis of many others, including Dan Lortie, Edward Lawler, Daniel Koretz, Richard Murnane, David Cohen, Allan Odden, and Carolyn Kelley. Finally, we thank the teachers union leaders, district officials, teachers, and school principals who participated in two recent studies we conducted at the Project on the Next Generation of Teachers—the first about teachers union presidents and the second about Peer Assistance and Review. Their accounts and comments about teacher compensation and the career of teaching helped us to ground our proposals for reform in the current needs and realities of schools, districts, and teachers’ work.

Copyright © 2009 Economic Policy Institute
ISBN: 1-932066-40-3
Manufactured in the United States of America

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