The Compensation Question: Are Public School Teachers Underpaid?

By Richwine, Jason; Biggs, Andrew et al. | Education Next, Fall 2012 | Go to article overview

The Compensation Question: Are Public School Teachers Underpaid?


Richwine, Jason, Biggs, Andrew, Mishel, Lawrence, Roy, Joydeep, Education Next


Over the past few years, as cash-strapped states and school districts have faced tough budget decisions, spending on teacher compensation has come under the microscope. The underlying question is whether, when you take everything into account, today's teachers are fairly paid, underpaid, or overpaid. In this forum, two pairs of respected economists offer very different answers. Andrew Biggs of American Enterprise Institute and Jason Richwine of the Heritage Foundation argue that, considering skills, workload, and benefits, today's teachers are, on average, overpaid. Lawrence Mishel of the Economic Policy Institute and Joydeep Roy of Columbia University and New York City's Independent Budget Office argue that Richwine and Biggs are off the mark, and that teachers deserve a raise. Read on, and decide for yourself.

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Jason Richwine & Andrew Biggs: Public school teachers are "desperately underpaid," Secretary of Education Arne Duncan said recently. A documentary film called American Teacher, which premiered last fall, portrayed heroic teachers struggling to get by on paltry incomes. The book on which the film is based went so far as to claim that "a teaching career guarantees a life of subsistence earning--month to month and hand to mouth."

Is public-school teacher compensation really inadequate? Like all public workers, teachers should be paid at a level commensurate with the market value of their skills, which represents the compensation needed to attract and retain a given set of workers. But comprehensive assessments of teacher compensation--covering salaries, fringe benefits, and job security--are uncommon.

As we will show, the analyses that do exist tend to be misleading and incomplete. While much variation in teacher pay exists across the nation and within the profession--younger teachers are paid considerably less than older ones, for example--the average public school teacher is compensated considerably better than comparably skilled private-sector workers.

Salaries

We begin with an oft-cited data point: after controlling for differences in education, experience, race, gender, marital status, and other earnings-related characteristics, public school teachers receive considerably lower total annual salaries than private workers. In fact, when treated as full-year employees, i.e., excluding the value of teachers' longer summer vacation, by our own estimate public school teachers receive a 19 percent salary penalty.

Yet this type of analysis, which uses linear regression to adjust for skill differences, cannot support strong conclusions about the salaries of a single occupation. Unobserved ability differences, systematic errors in the observed variables, and varying work conditions could all be influencing the observed salary gap.

Imagine analyzing other occupations. If we added to the regression an indicator for architects, for example, we would find that architects receive a salary premium over seemingly comparable workers. Yet few people would immediately conclude that architects are "overpaid," since architects could easily have skill characteristics not captured by the existing variables. Those who use the standard regression to argue that teachers are underpaid must also conclude that architects are overpaid, food-service workers are underpaid, computer programmers are overpaid, and so on.

The first argument for why the standard regression is misleading concerns the use of years of education (or highest degree obtained) as a measure of teacher skill. The implicit assumption is that education's effect on future earnings is consistent across fields of study. Does a person who majored in education possess the same skills as the average college graduate, much less one who majored in engineering? Probably not. Students majoring in education score lower than other college students on tests like the SAT and GRE. …

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