Teacher Performance Pay Plan a Good Idea

The following article was posted on Mickey Hepner's blog Mickey's Musings on 3/3/2008.

One of the central tenets of economic thought is that people respond to incentives. Two local legislators are showing that they understand this principle with their proposal to test a performance pay plan for public school teachers.

State Rep. Lance Cargill has authored HB3390, the Higher Outcomes and Performance in Education (HOPE) Rewards Act of 2008, which would award up to 25 grants per year to local school districts that implement a performance improvement plan. These plans must include a plan to set improvement objectives, measure student performance, and provide additional professional development to teachers. Most notably though, these improvement plans must include a provision to financially reward good teachers. Edmond state Senator Clark Jolley has signed on as the primary Senate sponsor of the legislation.

Currently, school districts compensate teachers mainly off of the teacher’s level of experience and training. Generally, those with more experience and training receive higher salaries than those with less. Unfortunately though, training and experience are imperfect proxies for quality. Two teachers with identical levels of experience and training could be very different in their level of teaching effectiveness. Furthermore, some teachers with less training and experience could be more effective teachers than others with more experience and training. Consequently, the current system provides an incentive to get more training, but not necessarily to become a better teacher.

Of course, there are some important non-financial incentives to becoming a better teacher. These incentives, what economists often refer to as “moral” and “social” incentives, are very real and explain why so many of our public school teachers work so hard to become better at their profession. Ideally though, one would want the financial incentives to complement the moral and social incentives teachers already face. Unfortunately, the current teacher compensation model falls short of this goal. HB 3390 would address this issue so school districts could provide teachers with a financial incentive to become a better teacher.

When we want to incentivize good teaching though, we need to make sure that we provide the proper incentives that reward good teaching. A poorly structured incentive system can actually be counterproductive. When I was an undergraduate student I paid for my tuition by working for a local department store. That department store wanted to incentivize good salesmanship by its employees, so the store implemented a commission system allowing those with greater sales to receive higher pay.

After the commission system was introduced, the level of customer service went…down. This occurred because the store’s incentives were counterproductive to the store’s goals. You see, the store wanted to incentivize salesmanship—the ability to help customers spend more money. Yet, they decided to measure this salesmanship by tracking the amount of sales rung up by each employee at the cash register. Instead of encouraging salespersons to greet and help customers find merchandise, this system actually encouraged the sales force to cluster around the register in order to receive credit for more sales. In short, the commission system backfired because it incentivized the wrong behavior.

Like salesmanship, teaching effectiveness is also a difficult quality to measure. Often schools resort to using student test scores as an indicator of teaching effectiveness. Like cash register sales though, this is an imperfect measure. Rewarding teachers for increasing student test scores incentivizes higher test scores, not necessarily better teaching. Economic research generally finds that when schools place a greater emphasis on standardized tests, many bad teachers respond not by getting better at their job but by cheating. One study of the Chicago Public Schools system found that in 1996 5% of Chicago’s teachers were literally changing the answers on their students’ standardized tests!

Some opponents of performance pay for teachers point to such problems as a reason to oppose any performance pay plan. It is true that accurately measuring teaching effectiveness will remain an imprecise process that requires some subjective judgment. In that regards any performance pay plan for teachers is an imperfect plan. But it is also true that our current system of teacher pay is also imperfect because it does not reward excellence. Frankly, if we want our teachers to strive towards excellence, then we need to reward excellence. HB 3390 begins to establish a process that will do just that.

Each year there are only a handful of bills that offer the chance to leave a positive, enduring mark on Oklahoma. This year, HB 3390 is one of those bills.

© 2008 Mickey Hepner

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