Urban Institute Study of Merit Pay Systems

Merit Pay

A recent Urban Institute examination of merit pay in eighteen school districts illustrates the problems with implementing merit pay. While the authors report some positive short-lived effects of merit pay--reduced turnover and absenteeism, greater goal orientation, increased engagement in constructive and innovative activities--they conclude that most plans had "major problems." They state: "By and large, the school districts we examined did not succeed at implementing lasting, effective, monetary or non-monetary incentive plans, ones that had a demonstrated ability to improve student learning (presumably the major rationale for providing added public funds in the case of monetary incentives)." The negative outcomes include (1) teacher morale problems from increased competition and divisiveness; (2) teachers being upset because they did not get the awards they deserved; (3) the use of quotas on the number of teachers who could receive awards; and (4) the plans were costly and time-consuming. The authors also reviewed other studies of merit pay and found "little evidence from other research, including the evaluation literature, that incentive programs (particularly pay-for-performance) had led to improved teacher performance and student achievements."

There were several merit pay systems in existence in Pennsylvania school districts in the late 1970’s, particularly in the Southeastern and Mideastern Regions (Downingtown, Great Valley, Lower Merion, Tredyffrin/Easttown, Upper Darby). All of those merit pay plans were abandoned in favor of the salary schedule. As is the case with many of the traditional merit pay plans, these plans resulted in serious inequities among teachers with similar skill and performance levels, and created morale problems. There was no evidence that the plans improved performance. In most cases, the school boards sought to eliminate them.

While merit pay is still used in many private sector companies, individual pay-for-performance plans appear to be on the decline. A report by the Committee for Economic Development, an independent research and policy organization of some 250 businesses, does not support the use of merit pay for teachers. Their report, Putting Learning First, states:

Individual merit pay has received the most attention in debates on how to improve teacher performance. But research indicates that individual merit pay may be a less effective performance incentive than group bonuses or nonmonetary professional rewards. Even in business, the trend is moving toward rewards based on the results of group effort.

The importance of rewarding experience

According to Bacharach et al., the advantages of the salary schedule, as opposed to merit pay, are associated with what it does not do. The salary schedule does not: "encourage administrators to evaluate only those aspects of teaching that are easily measured; create disincentives to reveal negative information; inhibit collegiality; or "give teachers reasons to think their students stand between them and a raise in pay."

A direct strength of the salary schedule, Bacharach et al. argue, is that it "reflects our basic understanding of how teachers acquire their skills." Teachers report that experience is a critical means of learning how to teach. Conley and Odden note that the teacher development literature "considers experience an integral component of basic development sequences: career stages or phases are delimited by particular years of teaching experience." Thus, if teachers develop their skills over time, it is logical to reward experience. Summarizing the rationale for rewarding experience, Bacharach et al. state: "If experience is the single most important ingredient in learning how to teach, then it is both logical and equitable that a compensation system should reward experience with additional pay."

Several studies have found a relationship between experience and student performance. Hanushek reviewed 130 studies that examined the relationship between educational inputs (e.g., teacher education, student-teacher ratios, quality of facilities) and student performance. Hanushek found experience was one of the strongest predictors of performance. Murnane and Philips claim that school performance studies (such as those examined by Hanushek) are flawed because they did not take into account teacher abilities. When they incorporated teaching ability into their statistical model, Murnane and Philips found a strong relationship between experience and performance.

Is there a point--five, ten, twenty, thirty years of experience--at which seniority increments should be terminated? Except for Murnane’s study, most research indicates no effect of experience on student performance after five years. While it may make sense to continue seniority increments beyond five years to reward loyalty and perhaps reduce turnover, long schedules cannot be justified on the basis of its impact on student performance.

Some districts in Pennsylvania and other parts of country now make the seniority increment contingent upon a "satisfactory" or "proficient" rating. In Douglas County, Colorado, for instance, teachers receive "evaluation increments" if their performance is judged "proficient" on established criteria as judged by the principals.

Bacharach et. al. stress that administrators should only be given the discretion to withhold step increments under "carefully-specified conditions." Those conditions include:

• a teacher has already been put on notice that his or her performance is seriously deficient;
• the teacher has been given a clear understanding of what he or she must do to bring performance up to minimally accepted standard;
• the teacher has been given time but has failed to take sufficient remedial action; and
• the teacher has been warned that continued failure to do so will result in dismissal.

Bacharach et. al. emphasize the importance of adopting all of the elements described above:

Withholding a step increment, under such a procedure, would be the functional equivalent of a disciplinary action, entitling the teacher to a hearing before an arbitrator or other third-party neutral. As in other cases, the burden would be on the employer that such action was justified... If all elements of this proposal were adopted, the interests of the teacher involved, his or her students, and the district as a whole would be protected. And the district would have more flexibility to deal effectively with genuine incompetence, without making more sweeping compensation "reforms" that cast aspersions on the competence and dedication of the vast majority of teachers.

The advantage of the Bacharach procedure is that it requires districts to provide training for teachers who receive unsatisfactory ratings. The procedure also prevents teachers from being penalized for having a single bad performance on the day they are evaluated. Since the goal of all parties should be to have competent teachers in all classrooms, it makes no sense to permanently penalize teachers who become proficient after redressing whatever weakness were identified. Once this occurs, they should be placed on the step they would have been at if they had not received an unsatisfactory rating. It’s one thing to withhold an increment during a period of unsatisfactory performance; it’s excessively punitive to force the teacher to pay a lifetime penalty once they have become proficient.

The importance of rewarding educational attainment

Few people would dispute the value of having teachers continue to keep abreast of developments in education and their field of study. Some may question whether teachers should be paid when they acquire additional credits. Teachers pay-for-knowledge system, inherent in the education columns of the salary schedule, is not unique. As noted above, in the private sector, many private sector employers, particularly those who are implementing team systems, are moving away from merit systems and toward skill-based pay systems. It is encouraging to see that the private sector is finally coming around to a system that educators developed decades ago.

School districts are not the only organizations willing to compensate employees with greater levels of education. A recent U.S. Census Bureau study illustrates the obvious relationship between education level and income. The study reported that high school graduates earn more than those who do not complete high school, college graduates earn more than high school graduates, and those with advanced degrees earn more than those with a bachelor’s degree. The Census report found that those with Master’s degree earned, on average, 33.4 percent more than those with a Bachelor’s degree. Using the same data, Business Week found a 39 percent differential between those with a bachelors degree and those with master’s, doctorate, or professional degree.

Finally, the Ridge Administration has acknowledged the importance of college coursework. The continuing education mandate in its KIDS II package, now contained in Senate Bill 1410, requires a relicensure every five years. This continuing education mandate has been endorsed by both Secretary Hickok and the Pennsylvania School Boards Association. In order to be relicensed, teachers would be required to complete stringent coursework or professional development activities. There is general consensus that continuing education is important for educators. We believe districts should reward teachers for attaining higher levels of education.