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Teacher Compensation. Michael Podgursky Department of Economics University of Missouri – Columbia NCSL Conference Phoenix, AZ Dec. 1-2, 2007 Co-investigator, CALDER, NCPI. Teacher Quality/Compensation Qauntity-Quality Tradeoff. Student Enrollment, Teacher and Non-Teacher Employment

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Teacher compensation

Teacher Compensation

Michael Podgursky

Department of Economics

University of Missouri – Columbia

NCSL Conference

Phoenix, AZ Dec. 1-2, 2007

Co-investigator, CALDER, NCPI

Teacher quality compensation qauntity quality tradeoff
Teacher Quality/CompensationQauntity-Quality Tradeoff

Student Enrollment, Teacher and Non-Teacher Employment

In Public Schools: 1980 - 2003

3.049m Public School Teachers

Fall, 2003

Falling student teacher ratios u s and missouri 1987 2004
Falling Student-Teacher RatiosU.S. and Missouri, 1987-2004

Teacher compensation1
Teacher Compensation

  • Salary and Benefits account for roughly 90 percent of K-12 instructional costs

  • Data Quality Issues (NCES plans)

  • Single Salary Schedule

  • Retiree Benefits

Teacher compensation2
Teacher Compensation

  • Single Salary Schedule

    • Compensation Policy Affects the Behavior and Composition of the Workforce

      • “You can’t repeal the law of supply and demand”

    • Rigidities by

      • Teaching field (esp. math, science, special ed)

      • School Conditions

      • Quality of Effort

Difficulty in filling vacancies by teaching field
Difficulty in Filling Vacancies by Teaching Field

  • Varies considerably by field

  • Generally somewhat easier in 2003-04 than 1999-00

  • NCES Schools and Staffing Surveys, 1999-00 and 2003-04

Staffing Difficulties in Low (<25%) and High (>75%) Poverty Schools:

Elementary Ed 2003-04

Source: Schools and Staffing Surveys 2003-04

Potential supply Schools:

Current supply

New Hires

Consequences of salary schedules
Consequences of Salary Schedules Schools:

  • School Conditions

    • School with highest percentage of poor children likely to have least experienced teachers

  • Quality of Performance

    • Performance-based pay

      • School-wide or individual

      • Role of test scores

      • Size of bonuses

  • Encourage Districts to Experiment

    • Federal Teacher Incentive Fund (TIF) Grants

    • NCPI Vanderbilt – IES funded experiment

    • Implement in a way that permits evaluation (pilots)

Types of Incentives: Teacher Weights Schools:

“Does the district currently use any pay incentives such as cash bonuses,

a salary increase, or different steps on a salary schedule to reward …”

Teacher pensions some stylized facts
Teacher Pensions: Schools:Some Stylized Facts

  • Mostly state-wide systems

  • Roughly 70 percent of teachers are in Social Security. Generally state decision.

  • Nearly all teachers are in Defined Benefit plans. DC and CB options very limited

  • Mean retirement age is well below Social Security and Medicare ages

    • 58 years (retired and stopped teaching, SASS TFS)

  • Very Expensive

  • Many are under funded

Incentives in teacher pension systems
Incentives in Teacher Pension Systems Schools:

  • In public sector DB pension systems accrual of pension wealth is highly non-linear and back-loaded

  • State systems generally have sharp “spikes” in accrual rates

    • Pull teachers to spike

    • Push out after

  • Not inherent in DB pension systems.

    • “cash balance” (IBM and other firms)

    • Can smooth spikes

Typical DB teacher pension Schools:


Pension = S x FAS x r(S,A)

S = service years

FAS = final average salary

r(S,A) = replacement factor

Incentives for work and retirement
Incentives for Work and Retirement Schools:

  • Compute pension wealth at each year of work life

  • Compute growth of pension wealth from an addition year of work

  • Representative teacher

    • Enters at 25, continuous spell of work

    • Standard assumptions concerning PV of pension wealth. (see Costrell and Podgursky (2007) )

Ohio Year:

Increment to PV of Pension Wealth from Working an Additional Year:


r = 2.5% S ≤ 30

r = 2.55% S ≥ 31

Changed in July 2001

Unintended consequences of early retirements
Unintended Consequences of Early Retirements Year:

  • Retiree Health Insurance (OPEB)

Other post employment benefits opeb
Other Post-Employment Benefits (OPEB) Year:

  • Retiree Health Insurance

  • Largely Unfunded

  • Estimates of Liabilities Required Under New Accounting Rules

    • GASB 43, 45

  • Initial Estimates of UAL Very Large

    • LAUSD - $10b

2006 GASB 45 Estimates, LAUSD Year:



Unintended consequences of early retirements1
Unintended Consequences of Early Retirements Year:

  • Retiree Health Insurance (OPEB)

  • Reemployment of Teachers/ Administrators (“double-dipping”)