"Inferior Equilibrium" in Teachers' Pay

That's how one economist describes the bad but stable situation in which salaries for educators remain stuck at low levels

By Peter Coy

Most Americans forget, but teaching used to be a pretty well-paid profession for women. Through the 19th and most of the 20th centuries, in fact, women who wanted interesting, financially rewarding careers became teachers, because they had few other choices for jobs outside the home except for domestic service, factory employment, or clerical work. As recently as the late 1970s, female teachers got about 10% higher pay than the average woman with a four-year college degree.

Women's liberation, as it used to be called, changed that picture drastically. As more women became doctors, lawyers, engineers, and business executives, the pay of teachers failed to keep pace with the pay of the overall population of educated women. By 1999, the average woman with a four-year college degree made about 10% more than the average female teacher. And that actually understates the pay gap, because many female teachers have master's degrees, so they're more educated than the group they're being compared with.


  More women in other careers is certainly a plus for the gender and for society as a whole. But the nation is paying the price for keeping a lid on teacher salaries, argues Peter Temin, an economics professor at Massachusetts Institute of Technology. Fewer and fewer of the best and brightest college graduates are entering the teaching profession, and those who do leave sooner.

Temin cites work by Richard Murnane, a professor at the Harvard Graduate School of Education, who found that teachers with high test scores quit teaching sooner than those who did less well. Murnane also found -- to no one's surprise -- that low-paid teachers quit sooner than high-paid teachers.

The National Education Assn., the largest teachers' union, found that after inflation, teachers' salaries have risen just 0.3% a year over the past 10 years. "As more money was invested in public education, teacher salaries remained stagnant -- all while the U.S. was in a time of economic expansion," NEA President Bob Chase said at a conference recently. The average classroom teacher in the U.S. will get $44,600 in salary this year.


  As state and local budgets get tighter, increases are likely to be scanty. In Arkansas, for instance, a planned $3,000 salary boost for teachers has been scaled back to just $500. Nationwide, the NEA is projecting that increases won't even keep up with inflation in the coming year. In Temin's view, years of low pay have dropped the quality of the teaching pool to the point where many of today's teachers aren't up to the job of educating the next generation.

What to do? The obvious solution is to raise teacher pay -- which is exactly what Temin advocates. But he says it will be extremely hard to raise pay meaningfully because society is trapped in an "inferior equilibrium" -- a bad but stable situation in which pay remains stuck at a low level.

The low-pay problem started when school boards and voters failed to understand that they needed to raise pay for the predominantly female teaching corps as more career doors opened to women. Reliance on local property taxes exacerbated the problem. Court decisions that admirably attempt to equalize spending between rich and poor school districts have had the unintended consequence of equalizing downward -- rich districts lower spending more than poor districts raise it.


  School administrators have dealt with the worsening quality of teachers by micromanaging them, further discouraging top candidates, Temin argues. He says teachers' unions have made matters worse by opposing merit pay and making it difficult to fire bad teachers.

Some excellent teachers still enter the field and stick to it even though they could earn more in other jobs, Temin says, but increasingly they're the exception, not the rule. And the rise of underqualified teachers will have an adverse impact on all other school reforms -- from charter schools to new instructional methods to computers in the classroom, he claims.

Raising pay would make a lot of those problems go away. But here's the dilemma, Temin concedes: It would take decades before higher pay would attract enough bright new teachers to make a big difference in the composition of the teaching corps. Meanwhile, he says, the higher pay would be going to today's crop of teachers. It's unlikely that they will suddenly perform better just because they're getting paid more. And voters are in no mood to reward the incumbent teachers in the hopes that they'll eventually be replaced by better ones.


  Tying raises to greater accountability might make voters more likely to go along, Temin suggests. He also thinks voters might be willing to pay teachers more if raises were based on merit. But expect a fight from teachers' unions. NEA policy analyst Michael Pons says teachers rightly resist having their pay linked to their students' test scores because the scores don't accurately reflect how well the teachers are doing.

The NEA also opposes merit pay. Says Pons: "I'm not aware of any study that says merit pay has really enhanced productivity in the private sector."

So the "inferior equilibrium" endures. In the long run, it threatens American prosperity, which depends on the world-beating productivity of a well-educated workforce. Argues Temin: "We are in danger of losing the educational advantage that the U.S. enjoyed in the 20th century." Sometimes simple solutions come in complicated packages.

Coy is Economics editor for BusinessWeek

Edited by Douglas Harbrecht

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