How Has Teacher Compensation Changed?

1THE URBAN INSTITUTE / Washington, D.C.

How Has Teacher Compensation Changed?

Report Prepared for the

National Conference on Teacher Compensation and Evaluation

Dan Goldhaber

The Urban [email protected]


Concern Over Teacher Salaries

• “We’re beginning to see a slight improvement in salaries, but it’s a drop in the bucket compared with what needs to be done to hire sufficient numbers of talented teachers. . . When engineering, law, accounting and computer firms need high-quality employees, they’re willing to pay good salaries to attract the best and brightest. It shouldn’t be any different when it comes to educating our children.”

– Sandra Feldman, AFT President


Policy Significance

• Teachers matter!– Unmeasured characteristics - Goldhaber et al. (1999),

Rivkin, Hanushek, and Kain (1998), Sanders (1997)

– Academic Skills - Ehrenberg and Brewer (1994), Strauss and Sawyer (1986), Wayne (2001)

– Ferguson (1991, 1998)• Increasing teacher test scores by 1 standard deviation raises

student scores by .17 standard deviations


Teachers’ Skills

• On average, teachers have– Lower standardized test scores– Require more remediation in college– Attend lower quality undergraduate institutions

• “College graduates with high test scores are less likely to take jobs, employed teachers are less likely to stay, and former teachers with high test scores are less likely to return” (Murnane, et al. 1991, p. 10)


943

968

999 10001003 999

800

850

900

950

1000

1050

Individual SAT Average SAT of IncomingFreshmen

Av

era

ge

Co

mb

ine

d S

AT

Sc

ore

Public School Teacher Private School Teacher Non-Teacher

** Denotes statistically significant differences (p=.05)Data Source: Baccalaureate and Beyond First (1994) and Second (1997) Follow-Ups.

=56** =60** =32** =31**

Average SAT Scores


Teacher Compensation andShortage Issues

• Rising enrollments• Class-size reduction policies• Tight labor market

Teacher shortage– May exacerbate teacher quality problems

• Assumption: compensation affects decisions– Compensation must be measured correctly to determine

the incentives

– Teachers should not be thought of generically


What Has Happened to Salaries?

• From 1980 to 1997 teachers’ salaries increased by 120 percent, but …– Only a 19 percent increase in real terms, while

salaries in other occupations increased by 29 percent

– Changes in teacher demographics– Tremendous changes in working conditions


Various Measures of Change in Compensation

• Average compensation (salary & benefits)– Over time– Relative to other occupations

• Starting salaries– Over time– Relative to other occupations

• Discussion of structure of teacher salaries relative to salaries in other occupations


Data

• Bureau of Labor Statistics’ National Compensation and Employee Benefits Surveys

• National Center for Education Statistics’ Baccalaureate and Beyond

• U.S. Department of Education’s Digest of Education Statistics

• American Federation of Teachers


Employer Costs for Employee Benefits

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

1991 1992 1993 1994 1995 1996 1997 1998Source: BLS, 1998c

Elementary and Secondary Schools State and Local Gov. - White Collar

Private - White Collar


58

84

59

85

97

38

87

62

87

96

14

64

31

62

46

20

76

59

87

79

0

10

20

30

40

50

60

70

80

90

100

Paid personalleave

Medical care Dental care Life insurance Retirementpackage

Source: BLS 1995, 1998, 1999

Teachers State and local govt. Small private industry Medium and large private industry

Percentage of Employees Who Receive Selected Benefits


Average Teacher Salaries

$13,000

$18,000

$23,000

$28,000

$33,000

$38,000

$43,000

1978

-79

1979

-80

1980

-81

1981

-82

1982

-83

1983

-84

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

Source: U.S. Department of Education, Digest of Education Statistics 1998

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

Current Dollars Constant (97-98) Dollars


Growth Rate in Wages and Salaries

4.5%

3.3%

4.6%4.3%

8.9%

6.0%

2.8%

7.2%

6.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%19

81

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Source: Goldhaber (2001)

Private - White Collar State and Local Gov. - While Collar Elementary and Secondary Schools


Summary: Changes in Average Salary and Benefits

• Benefit coverage:– Comparable to coverage offered to other state and

local employees– Exceeds that offered in the private sector as a whole

• Growth in teachers’ average salaries:– Lagged other sectors in the 1970s & early 1980s,

exceeded other sectors during 1980s & early1990s


Average vs Starting Salaries

• Average salaries are driven by degree and experience level only– Average salary can increase w/o increases in starting salary

• Shifts in degree and experience distribution can increase average salaries without making teaching a more attractive profession

– Shifts in the age distribution can increase average salaries

– Evidence of backloading (Lankford and Wyckoff, 1997)

• Starting salaries may be more relevant to individuals considering teaching as an occupation


66.1% 66.3%

65.4%65.1% 65.1% 65.1% 65.2% 65.0% 64.9%

64.2%

65.3%

66.3%

$25,735$25,598

$17,604

60.0%

61.0%

62.0%

63.0%

64.0%

65.0%

66.0%

67.0%

68.0%

69.0%

70.0%

1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

Source: Digest of Education Statistics (years 1989-1999), AFT (1999a, 1999b)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Min Salary as a % of Ave Salary Min Salaries (constant 97-98 $)Min Salaries (current $)

Minimum Average Starting Teachers' Salaries


1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2

1972 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1995 1996 1997Source: Schneider and Nelson (1998)

Engineering Accounting Sales/Marketing Business Admin. Liberal Arts

Chemistry Math or Statistics Economics/Finance Computer Science

Ratio of Starting Salaries in Select Occupations to Starting Salaries in Teaching


1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

1978 1980 1982 1984 1986 1988 1990 1992 1994 1995 1996 1997

Source: Schneider and Nelson (1998)

Teaching* Engineering Accounting Sales/Marketing Business Admin.

Liberal Arts Chemistry Math or Statistics Economics/Finance Computer Science

Starting Salaries Indexed to 1978Teaching


Correlation between Relative Salaries and GDP Growth Rate

Acc

ount

ing

Bus

ines

sA

dmin

istr

atio

n

Che

mis

try

Com

pute

rS

cien

ce

Eco

nom

ics

Eng

inee

ring

Lib

eral

Art

s

Mat

h/S

tatis

tics

Sal

es &

Mar

ketin

g

Cor

rela

tion

Coe

ffic

ient

s

-.12

(.68)

-.37

(.19)

-.23

(.43)

-.23

(.46)

-.28

(.34)

-.37

(.19)

-.31

(.28)

-.44

(.12)

-.42

(.13)


Difference Between Starting Salaries in Teaching and Selected

Other Occupations17

,071

14,5

58

9,40

9

5,45

7

7,43

6

6,51

1

6,03

5

7,06

0

4,49

1 5,43

4

12,3

54 12,9

56

9,80

9

10,1

47

6,09

2

8,29

3

11,0

67

11,4

03

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

1978 1997

Source: Schneider and Nelson (1998)

Engineering Accounting Sales/Marketing Business Admin. Liberal Arts

Chemistry Math or Statistics Economics/Finance Computer Science


Structure of Compensationin Education

• Single salary schedule– 1921 was adopted in Denver, CO & Des

Moines, IA– Places teachers on salary lanes based on degree

and experience levels only

• Today over 95 percent of school districts use this pay structure– Average salaries may not be a good indicator


You Can’t Escape the Labor Market

• Hedonic wage theory applies (Chambers, 1998)• Sorting occurs along non-pecuniary lines

– Graduates of more selective colleges are more likely to teach higher income, higher achieving students

– Shortages in particular subject areas

• Shortages vary by:– Region

– Subject area

– School system demographics


Math and History Teachers

Wage Wage

employment employment

Single salary schedule wage

Math Teachers History Teachers

D

D

S

SEquilibrium math wage

Equilibrium history wage


Important Changes Under the Surface

• Labor market differentially rewards skills• Important changes under the surface

– Returns to college quality and technical college skills (degree major) have increased

• There is an increasing return to graduating from a top college or university (Brewer et al., 1999)

• There is an increase in the gap (in entry level salaries) between education and technical majors (Grogger and Eide, 1995)

• Single salary schedule does not reflect these changes


SAT Score by Sector and Major

1011

938

1128

987

1081

985

0

200

400

600

800

1000

1200

Technical Major Non Technical Major

Co

mb

ine

d S

AT

Sc

ore

Public School Teacher Private School Teacher Non-Teacher

Data Source: Baccalaureate and Beyond First (1994) and Second (1997) Follow-Ups.

=117 =70

=49 =47


Average Salary as a Function of SAT (Bachelor’s Degree)

10000

15000

20000

25000

30000

35000

40000

45000

50000

400 600 800 1000 1200 1400 1600

Combined SAT Score

An

nu

al S

alar

y

Public School Teachers

Private School Teachers

Non-Teachers

Data Source: Baccalaureate and Beyond Second (1997) Follow-Up.Notes: Trendline estimates are based on the full sample of SAT scores and annual salaries.Data points represent average salaries for all individuals who obtained a given SAT score.


Starting Salary as a Function of SAT (Bachelor’s Degree)

10000

15000

20000

25000

30000

35000

40000

45000

50000

400 600 800 1000 1200 1400 1600

Combined SAT Score

Sta

rtin

g S

alar

y



Non-Teachers



Average Salary as a Function of SAT (Masters Degree and Above)

10000

15000

20000

25000

30000

35000

40000

45000

50000

400 600 800 1000 1200 1400 1600

Combined SAT Score

An

nu

al S

alar

y



Non-Teachers



Starting Salary as a Function of SAT (Masters Degree and Above)

10000

15000

20000

25000

30000

35000

40000

45000

50000

400 600 800 1000 1200 1400 1600

Combined SAT Score

Sta

rtin

g S

alar

y



Non-Teachers



Preliminary Analyses

X represents a vector of background characteristics and pub is an indicator for a public school teacher

)*( xxY pubpub

Public School Teachers Non-Teachers

Age NS +

Experience + +

Sex NS +

College Quality NS +Masters Degree + NS

Technical Major NS +GPA NS +


Implications of Findings

• Public schools do reward master degrees but do not reward individual SAT, college quality, or technical majors.– e.g. individuals with technical majors estimated

to make $4470 more than non-technical majors outside of teaching, but about $2000 less in teaching


Alternatives to the SingleSalary Schedule

• Individual-Level Merit Pay Plans– Reward teachers for individual performance

• School-Based Bonuses– Reward schools for collective performance

• Competency / Contingency Pay Plans– Reward individual teachers for acquiring skills

• National Board Certification


Conclusion

• How has teacher compensation changed? It has and it hasn’t

– It’s the structure stupid!• Need for more research on the impact of

alternative compensation structures on the recruitment and retention of types of teachers

How Has Teacher Compensation Changed?

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