Don’t Raise Teacher Pay; Reform It

Teachers rally over pay and education funding outside the state Capitol in Oklahoma City, Okla., April 3, 2018. (Nick Oxford/Reuters)
Compensation is inefficient, not low.

Teachers across the country are protesting for higher pay, and polls show the public is behind them. But Americans significantly underestimate teachers’ salaries and benefits, and those misconceptions are encouraging the wrong kind of reform.

A 2017 poll by the journal Education Next found that 70 percent of parents supported higher teacher salaries. Teachers pushing for pay increases in Oklahoma, Arizona, West Virginia, and elsewhere are counting on that public support. But Education Next also asked parents what they thought the typical public-school teacher was paid. Parents’ average answer was $39,492, nearly $19,000 below the true average salary (not including benefits) of $58,313. Once provided accurate salary information, only 42 percent of parents still favored teacher-pay increases. Even teachers couldn’t accurately guess the average teacher salary. And teachers’ support for pay raises dropped by over 20 percentage points when they found out the true average salary.

It’s also a myth that teachers are “losing ground” to other college graduates. Teachers’ wages did fall relative to those of private-sector college graduates during the economic boom of the late 1990s. But Census Bureau data show that since 2000, teacher and private-sector salaries have risen at about the same rate.

The same misconceptions hold with teacher pensions, which the National Education Association describes as “modest.” Using a familiar talking point meant to downplay pension generosity, CNN recently declared that “the average state and local pension benefit was $27,415 a year in 2016.” But this average includes teachers who retired after only a short period of teaching. There is no reason to suppose that part-career teachers could not or did not save during the years they spent in other jobs.

Over a full career, teacher pensions are generous. Consider Oklahoma, where teachers are widely considered underpaid. An Oklahoma public-school teacher who retired in 2017 after a full teaching career received $45,888, plus an estimated Social Security benefit of $18,240. That total retirement income of $64,128 is equal to 94 percent of the teacher’s final salary, well above the 70 percent that financial planners say retirees need to provide a comfortable retirement. It is also 30 percent above Oklahoma’s median household income. Teachers may be middle-class employees, but they’re upper-middle-class retirees.

Teachers’ fringe benefits weren’t always that generous. According to the National Income and Product Accounts, public-school teachers in 1975 earned fringe benefits worth 19 percent of their salaries, slightly more than the 14 percent received by private-sector workers. By 2000, teacher benefits were nearly double those of private-sector workers, thanks in part to pension “enhancements” passed during the 1990s. And today, teacher benefits are worth 47 percent of annual salaries, versus only 19 percent for private-sector workers.

If compensation is so generous, why are there still teacher shortages, and why are so many teachers dissatisfied? Part of the answer is that school payrolls are rigid, backloaded, and wasteful. We propose three reforms.

Inaccurate portrayals of teachers as paupers lead policymakers to focus on costly raises that do little to correct the structural issues.

First, address any teacher shortages through targeted pay increases, not an across-the-board raise. Genuine teacher shortages exist, for example in STEM fields, but claims of a generalized crisis in teacher hiring don’t hold water. Schools managed to increase the number of teachers they employ by 13 percent between 2011 and 2015, a period in which the total U.S. work force grew by only 6 percent and the student population by just 2 percent. And only about 5 percent of teachers who leave the profession cite low pay. Across-the-board pay increases are unnecessary and massively expensive, and they provide no incentive for teachers to specialize in hard-to-fill subjects.

Second, schools should offer new teachers a cost-neutral deal: a higher salary in exchange for a more modest retirement plan. For instance, new Oklahoma teachers could receive an 11 percent salary increase in exchange for participating in a 401(k)-style plan instead of an expensive traditional pension. Even that less generous plan could offer an employer matching contribution four times greater than the private-sector average. Teacher compensation isn’t too low, but it’s backloaded into retirement benefits that teachers don’t value as much as upfront salary.

Third, schools wanting payroll flexibility for teachers should reduce administrative overhead. U.S. schools have added more than 3 million employees since 1970, but barely one-third were teachers. The rest were administrators, assistant principals, instructional coordinators, guidance counselors, teacher aides, and other support staff. The U.S. devotes nearly twice as many resources to non-teaching staff as other developed countries. What do we have to show for it?

Unfortunately, none of these reforms can happen in the presence of so many misconceptions about teacher pay. Inaccurate portrayals of teachers as paupers lead policymakers to focus on costly raises that do little to correct the structural issues.

Andrew G. Biggs is a resident scholar at the American Enterprise Institute. Jason Richwine is a publicpolicy analyst in Washington, D.C.

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