Teachers are not underpaid; they are underemployed. Almost everyone, including legislators, agree that teachers do not make enough money. But why are they not working as much as other occupations?
Teacher compensation comes in two types: base compensation, which is the pay that all teachers receive, and incentive compensation, which results from additional training or on-the-job performance.
In almost all states, teacher pay is driven by a salary schedule based on years of service and academic credits obtained. Nothing in the compensation system rewards teaching excellence. This type of structured compensation system was installed in the 1920s “to ensure equal treatment for all.”
No other profession operates this way. The current teacher compensation system is broken and needs to be totally changed.
A recent article in National Affairs by Andrew G. Biggs and Jason Richwine breaks down “The Truth about Teach Pay.” The authors cite from the annual report of the Economic Policy Institute (EPI) (which has ties to unions), which states, “the difference in salaries between teachers and similar private sectors…is 21% nationwide.” However, EPI simply compares teacher salaries with the salaries of people who have roughly the “same number of years of education and the same demographic characteristics.” In comparing occupations, educational completion is too vague as a skill measure. Not all bachelor’s degrees are created equal.
More specifically, EPI executes a regression analysis using Census Bureau data, where respondents make available the figures on their “salaries along with their age, education, region of residence, marital status, and other factors that are predictive of earnings.” Included in this analysis is a “dummy variable” indicating whether the individual is a public-school teacher. The constant on this variable signifies the outcome on salary of being a teacher.
This model cannot measure important differences among workers in different occupations. The argument halts when you discard the dummy variable and replace it with any other occupation. Biggs and Richwine point out that “about four in every 10 occupations we analyzed show an alleged wage premium or penalty greater than the one EPI claims for teachers.”
The authors state that, “no one is surprised or upset that people with engineering degrees earn more on average than people with literature degrees, nor does anyone believe that every occupation requiring a college degree should be paid the same.”
However, one issue not addressed by Biggs and Richwine is that of underemployment, as stated above.
Don Nielsen breaks out a specific example of teacher compensation in Every School: “[A]verage teacher pay in Seattle is $77,239 for a ten-month work year…That same teacher is actually making $58.51 an hour, plus a generous package of benefits that few private-sector employers can match. Teachers in Seattle are employed for 1,320 hours per year, regardless of how many hours they might actually work. If that teacher were employed for a standard year of 2,080 hours, at the same hourly rate, their annual salary would be $121,710.”
Consider two other examples of applying the current hourly rate to a standard year of 2,080 hours: New York, where teachers average $79,637 statewide, and South Dakota where teachers make on average $42,688. Adjust to the new standard and teachers would receive $125,488 and $67,266, respectively.
As Nielsen concludes, “The ideas presented here that involve compensation will require more money. However, every state is already spending a lot of money in dealing with high turnover and having to hire and train new teachers to replace those who leave the profession.”
The analysis above demonstrates that what we have is an employment problem, not a compensation problem.