How Has Teacher Compensation Changed? Report Prepared for the

National Conference on Teacher Compensation and Evaluation Dan Goldhaber The Urban Institute [email protected] 1 THE URBAN INSTITUTE / Washington, D.C.

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

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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

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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) 4 THE URBAN INSTITUTE / Washington, D.C.

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Average SAT Scores Average Combined SAT Score

1050

1000

950

999

1003

1000

=56**

=60**

=32**

968

999 =31**

943

900

850

800

Individual SAT Public School Teacher

Average SAT of Incoming Freshmen Private School Teacher

Non-Teacher

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

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Teacher Compensation and Shortage 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 6 THE URBAN INSTITUTE / Washington, D.C.

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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

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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 8 THE URBAN INSTITUTE / Washington, D.C.

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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

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Employer Costs for Employee Benefits $ 10.0 0 $8.0 0 $6.0 0 $4.0 0 $2.0 0 $0.0 0 1991

1992

1993

1994

1995

1996

1997

1998

Sourc e: BLS, 1998c

Elem entary and Sec ondary Sc hools

State and Loc al Gov. - W hite Collar

Private - W hite Collar

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Percentage of Employees Who Receive Selected Benefits

97 96

100 90

84

87

85 87

79

76

80 70 60

87

64

59 62

58

62

59

46

50 40

38 31

30

20

20

14

10 0 Paid personal leave

Medical care

Dental care

Life insurance

Retirement package

Source: BLS 1995, 1998, 1999 Teachers

State and local govt.

Sm all private industry

Medium and large private industry

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Average Teacher Salaries $45,000

$43,000

$40,000 $38,000 $35,000 $30,000

$33,000

$25,000 $28,000 $20,000 $15,000

$23,000

$10,000 $18,000 $5,000 $13,000 8

7

6

97

96

-9

-9 19

5 95

94

93

-9 19

4

-9 19

3

-9 19

2 92

91

-9 19

1

-9 19

0

-9 19

-9 89

90 19

8

9 88

87

86

-8 19

7

-8 19

6

-8 19

5 85

84

-8 19

4

-8 19

3 83

-8 19

2 82

81

80

-8 19

1

-8 19

0

-8 19

-8 19

79 19

19

78

-7

9

$0

S ourc e: U.S . Departm ent of E ducation, Diges t of E ducation S tatis tic s 1998 Current Dollars

Cons tant (97-98) Dollars

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Growth Rate in Wages and Salaries 10.0%

9.0%

8.9%

8.0% 7.2% 7.0% 6.6% 6.0%

6.0%

5.0% 4.6%

4.5%

4.3%

4.0% 3.3% 3.0%

2.8%

2.0%

1.0%

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

0.0%

Source: Goldhaber (2001) Private - W hite C ollar

State and Local Gov. - W hile Collar

Elem entary and Secondary Schools

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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 14 THE URBAN INSTITUTE / Washington, D.C.

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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

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Minimum Average Starting Teachers' Salaries 70.0% 69.0%

$30,000 $25,735

$25,598

$25,000

68.0% 67.0%

66.3%

$20,000

66.0% 65.0%

66.1% 66.3% $17,604

65.4%

64.0%

65.1% 65.2% 65.0% 64.9% 65.3%

65.1% 65.1% 64.2%

63.0% 62.0%

$15,000 $10,000 $5,000

61.0% 60.0%

$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) Min Salary as a % of Ave Salary Min Salaries (constant 97-98 $) Min Salaries (current $) 16 THE URBAN INSTITUTE / Washington, D.C.

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Ratio of Starting Salaries in Select Occupations to Starting Salaries in Teaching 2 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1 1972

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1995

1996

1997

Source: Schneider and Nelson (1998) Engineering

Accounting

Sales/Marketing

Business Admin.

Chemistry

Math or Statistics

Economics/Finance

Computer Science

Liberal Arts

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Starting Salaries Indexed to 1978 3

Teaching

2.8 2.6 2.4 2.2 2 1.8 1.6 1.4 1.2 1 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

18 THE URBAN INSTITUTE / Washington, D.C.

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Correlation Coefficients

Sales & Marketing

Math/Statistics

Liberal Arts

Engineering

Economics

Computer Science

Chemistry

Business Administration

Accounting

Correlation between Relative Salaries and GDP Growth Rate

-.12 -.37 -.23 -.23 -.28 -.37 -.31 -.44 -.42 (.68) (.19) (.43) (.46) (.34) (.19) (.28) (.12) (.13) 19

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$18,000

17,071

Difference Between Starting Salaries in Teaching and Selected Other Occupations 12,956

14,558

$16,000

10,147

11,067

6,511

4,491

$6,000

5,434

5,457

6,092

6,035

7,060

8,293

9,409 7,436

$8,000

9,809

$12,000

$10,000

11,403

12,354

$14,000

$4,000

1978

1997 S ource: S chneider and Nels on (1998)

E ngineering

A c counting

S ales /M ark eting

B usines s A dm in.

Chem is try

M ath or S tatistics

E c onom ic s/Financ e

Com puter S cienc e

Liberal A rts

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Structure of Compensation in 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 21 THE URBAN INSTITUTE / Washington, D.C.

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 22 THE URBAN INSTITUTE / Washington, D.C.

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Math and History Teachers S

Wage

Wage

Equilibrium math wage

S

Single salary schedule wage Equilibrium history wage

D

D employment

Math Teachers

employment

History Teachers

23 THE URBAN INSTITUTE / Washington, D.C.

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 24 THE URBAN INSTITUTE / Washington, D.C.

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SAT Score by Sector and Major 1200

1128 1081 1011

=117

=70

987

Combined SAT Score

1000

985

938 =49

=47

800

600

400

200

0

Technical Major

Public School Teacher

Non Technical Major

Private School Teacher

Non-Teacher 25

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

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Average Salary as a Function of SAT (Bachelor’s Degree) 50000

45000

40000

Annual Salary

35000

30000

25000

20000

15000

10000 400

600

800

1000

1200

1400

1600

Combined SAT Score 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.

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Public School Teachers Private School Teachers Non-Teachers

26

13

Starting Salary as a Function of SAT (Bachelor’s Degree) 50000

45000

Starting Salary

40000

35000

30000

25000

20000

15000

10000 400

600

800

1000

1200

1400

1600

Combined SAT Score 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.

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Average Salary as a Function of SAT (Masters Degree and Above) 50000

45000

40000

Annual Salary

35000

30000

25000

20000

15000

10000 400

600

800

1000

1200

1400

1600

Combined SAT Score 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.

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Public School Teachers Private School Teachers Non-Teachers

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14

Starting Salary as a Function of SAT (Masters Degree and Above) 50000

45000

Starting Salary

40000

35000

30000

25000

20000

15000

10000 400

600

800

1000

1200

1400

1600

Combined SAT Score 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.

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Public School Teachers Private School Teachers Non-Teachers

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Preliminary Analyses Y = β x + αpub + γ ( pub * x) X represents a vector of background characteristics and pub is an indicator for a public school teacher Public School Teachers

Non-Teachers

NS

+

+

+

Sex

NS

+

College Quality Masters Degree Technical Major GPA

NS + NS NS

+ NS + +

Age Experience

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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

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Alternatives to the Single Salary 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 32 THE URBAN INSTITUTE / Washington, D.C.

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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 33 THE URBAN INSTITUTE / Washington, D.C.

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