We Need to End the Soviet-Style Way We Pay Teachers — For Them, and For the Kids

How would you like to sign up for a job where no matter how hard you worked or good you were, you’d never get paid much more than your lazy coworker? That automatically pays people more if they’ve been on the job longer, regardless of whether they’re any better at the job?

And the pay isn’t so great, either. But if you agree to stay in the same job in the same place for, say, 20 or 30 years, then the government will finally reward you with a secure retirement. (Maybe. The promise is based on some fanciful assumptions.)

Does that sound like an appealing gig?

Or does it sound more like something out of the Soviet Union?

Everybody’s the same, everybody gets paid the same, and you don’t get to pick how you’re paid — you’ll take what you’re given.

Sadly, this is how we treat the vast majority of public school teachers in America, and it’s deeply unfair to them.

Two recent pieces of academic work highlight how bad this system is — and how society and teachers could benefit from reforming it.

One comes from the Thomas B. Fordham Institute, which examined how long teachers have to spend in their jobs in order to see the generous pensions that we assume most of them get.

It turns out, on average, only teachers who spend more than 25 years on the job — working in the same district — see a pension that’s worth more than they would have gotten from saving on their own.

Only teachers who spend more than 25 years on the job see a pension that’s worth more than they would have gotten from saving on their own.

You might think that that’s not such a big deal, as many teachers do stick to the job for their entire careers. In reality, most do not: almost three-quarters of teachers leave their job after less than 20 years.

To determine whether teachers are getting a good deal from their pension systems, the Fordham Institute compared two values:

  • the value of the pension teachers receive, measured as a lump sum of “pension wealth” — basically the amount of money you’d need to receive payments equal to your pension for the rest of your life;
  • the value of the retirement account teachers would have if, instead of making a retired contribution to the traditional pension plan, they’d just saved it themselves.

The value of the second option is greater in almost all the districts Fordham studied — for up to 20 or 25 years. Only after that, if a teacher keeps working, does he begin to see real benefits from his pension.

Check out this chart, looking at the situation in Colorado’s largest school district: the orange line is the wealth a teacher would have if he were to invest the contribution now made on his behalf, while the green line is the wealth a teacher has under the traditional pension system.Screen Shot 2017-02-13 at 9.58.31 AM

Clearly, the traditional system is a good deal if a teacher spends more than 20 years in the Jefferson County Public Schools. If not . . . it’s not so good.

The study lays out a better path, which a few states have already taken: moving away from the traditional “defined benefit” system to a “defined contribution” system, under which teachers accumulate their own savings and can withdraw them at any time.

A natural concern about this idea is that this doesn’t absolutely guarantee teachers a healthy income for their entire retirement, like the defined-benefit system does.

The study lays out a better path, which a few states have already taken: moving away from the traditional “defined benefit” system to a “defined contribution” system, under which teachers accumulate their own savings and can withdraw them at any time.

But remember: the guaranteed income isn’t available to most teachers who opt to leave the job or move elsewhere and never see a substantial defined-benefit payment. A defined-contribution system would leave them with much more in savings toward a secure retirement.

So that’s one way we lock teachers into a bad deal. Here’s another: No matter how good a teacher is, there are relatively few ways for them to be rewarded for it.

Most places across America, teachers’ salaries are largely set by salary schedules, which determine teachers’ pay based on how many years they’ve been a teacher, and whether or not they have an advanced degree.

No matter how good a teacher is, there are relatively few ways for them to be rewarded for it.

And yet those don’t really determine how good a teacher is: teachers improve after their first few years of experience, but not much after that; advanced degrees do make teachers better, but only if they’re in the subject they teach.

Teachers are paid based on salary schedules for two reasons: unions fight for them, and we don’t have universally accepted ways of measuring how effective teachers are. (It should be noted that, as Dana Goldstein recounts in her book “The Teacher Wars,” some large urban districts have somewhat broadened the criteria for salary schedules.)

But that’s assuming we need a universally accepted way of measuring quality. Why not let schools determine who’s good at teaching, and pay them more, like we would in just about any other sector?

Why not let schools determine who’s good at teaching, and pay them more, like we would in just about any other sector?

That’s what a reform passed by Wisconsin governor Scott Walker allowed districts to do, and a recent study by a Stanford economist (which has not yet been reviewed) finds that the benefits were huge.

After the Walker reform, some school districts stuck to salary schedules, while others chose to negotiate salaries with individual teachers. The study found that high-quality teachers flocked to districts that negotiate salaries, while low-quality teachers fled them. In other words, moving away from salary schedules substantially increased teacher quality, which will almost certainly improve the education kids are getting.

moving away from salary schedules substantially increased teacher quality, which will almost certainly improve the education kids are getting.

It’s reasonable to wonder what would happen if all schools in Wisconsin, or nationally, shifted to more individualized salaries. Would that still increase teacher quality relative to the status quo, or did the individualized districts in Wisconsin just poach the good teachers? The Stanford model suggests that the benefits would not be quite as big as the ones currently seen, but would still be substantial, because individualized salaries would cause lower-quality teachers to leave the profession.

Are there potential downsides to these kinds of reforms — moving away from a rigid system of compensation to a more individualized one? Sure.

For one, there’s all kinds of messiness that could result from abandoning a step system to salaries. We’d certainly see some shift in the type of people who are attracted to teaching, given the stark change in how they’d be paid. (The same would go for replacing pensions.)

We’d also impose non-negligible administrative burdens on schools, which would now have to negotiate more complicated contracts, and accept the risk that some teachers are going to have bad experiences in those negotiations. But the Wisconsin experience doesn’t suggest that this has been a problem; nor does the experience of private and charter schools that usually don’t use inflexible salary schedules.

Critics also object that getting rid of the traditional pension system will result in a pay cut for teachers, because they won’t see these benefits replaced. That would be terrible for teacher quality and therefore student learning.

Good salaries attract good teachers, and good teachers really do change lives. But as the Fordham Institute report makes clear, there’s a relatively easy way around this. Replacing the current system with a defined-contribution model would cut compensation for older teachers with extremely long tenure, but increase benefits for the vast majority of teachers — and often leave money for salary increases, too.

Conservatives like to talk about creating a market for public education, because we believe markets produce great outcomes.

But when the most important determinant of quality education is quality teachers, we don’t have to have a perfect market in public schools to start seeing big returns: We could start with a real market for teachers.

That means rewarding them like rational actors in a 21st century job market, not paying them like Politburo employees.

Patrick Brennan is a contributor for Opportunity Lives. You can follow him on Twitter @ptbrennan11.

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