Credentials Versus Performance: Review of the Teacher Performance Pay Research

Abstract

In this article we examine the economic case for merit or performance-based pay for K–12 teachers. We review several areas of germane research. The direct evaluation literature on these incentive plans is slender; highly diverse in terms of methodology, targeted populations, and programs evaluated; and primarily focused on short-run motivational effects. It is nonetheless fairly consistent in finding positive program effects. The general personnel literature highlights potentially significant selection effects of employee compensation systems. This is particularly relevant for teaching, because a growing body of production function research points to large, persistent, but idiosyncratic differences in teacher productivity. Thus, along with motivation effects, there is potential for substantial positive long run selection effects from teacher performance pay systems. The evaluation literature is not sufficiently robust to prescribe how systems should be designed (e.g., optimal size of bonuses, mix of individual vs. group incentives). However, it is sufficiently positive to support much more extensive field trials, pilot programs, and policy experiments, combined with careful follow-up evaluation.

We thank Samantha Dalton and Kelly Fork for research assistance. The usual disclaimers apply.

Notes

¹Local and state officials are currently exploring pay for performance initiatives in states such as Arizona, Arkansas, California, Florida, Minnesota, Iowa, Idaho, New Mexico, North Carolina, North Dakota, Texas, and Wisconsin. Moreover, the federal government has appropriated $99 million for a Teacher Incentive Program. Concomitantly, 60% of states have enacted legislation requiring localities to explore alternative compensation systems (Wallace, 2003).

²The TAP Web site states “There are over 125 TAP schools nationwide, impacting more than 3,500 teachers and 56,000 students” (http://www.tapschools.org/newsroom.taf?page =release_20060530_Algiers). The $100 million Teacher Incentive Fund implemented by the U.S. Department of Education is likely to accelerate the expansion of TAP schools in coming years.

³Another team examining New York City public schools reached a similar finding (Boyd et al., 2006).

⁴For example, the National Commission on Teaching and America's Future, in their influential 1996 report, stated, “It has always been difficult to recognize and reward good teachers in ways that are credible and objective. The merit pay plans of the 1980′s (like those of the 1950′s and 1920′s) have already disappeared because local evaluators did not have useful standards, or the time or expertise, to make reliable judgments about teacher competence …. In contrast, the careful process of National Board certification—based on evaluation by experts according to well-developed standards and a collaborative process—provides an alternative that teachers find credible, helpful, and an extraordinary learning experience” (p. 74).

⁵Among other things, principals were asked to assess the ability of teachers to raise student achievement on a scale from 1(inadequate) to 10 (exceptional).

⁶In the individual plan, teachers who applied for the award were evaluated on four criteria; one was a performance evaluation, and another was evidence of superior student achievement gains. Thus, this is not a strong test of the thesis.

^a These are winnings per class. However, a teacher could enter multiple classes.

⁷Hanushek, Kain, O'Brien, and Rivkin (2005) examined the mobility of high- and low-productivity teachers as measured by gain scores in a set of urban Texas school districts. They found no evidence that the teachers lured to suburban districts by higher salaries are more effective teachers. Of course, these suburban districts are almost certainly paying these teachers off of salary schedules and not direct measures of their productivity.