The traditional public school system had a very weak incentive structure. Since students automatically went to neighborhood schools, schools did not have to compete for students. The teachers unions long ago eliminated merit pay, and made teachers’ pay determined almost entirely by degrees and years spent teaching. Finally, in this traditional system, students had little incentive to work hard, especially when they did not expect to get much education, and could count on always getting promoted.
All this is beginning to change for the better, despite fierce opposition from teachers unions to virtually every important reform. School vouchers, and especially the charter school movement, is bringing competition to the traditional neighborhood school. No longer can public schools automatically have a captive audience of all the school age children in their neighborhood. Charter schools are expanding as rapidly as allowed by local and state restrictions that have been due mainly to lobbying of teachers unions.
Fortunately, restrictions on charter schools, and the even greater limits imposed on the scope of school vouchers, are breaking down, in large part because parents are becoming vocal, and are also voting with the feet of their children. In addition, careful evaluations of charter schools in randomized experiments that compare the performance on standardized tests of students in charter schools to performance by students in regular public schools generally show that charter school students do significantly better (see, for example, studies by Josh Angrist of MIT and co-authors of charter schools in and near Boston).
Some progress has also been made in finding ways to better motivate students, even in traditional public schools. A large and mainly well designed experiment of poor rural children in Mexico that began in the 1990s, originally called Progresa (now called Oportunidades), showed that even young children from uneducated families could be better motivated by financial incentives. Progresa gave monthly stipends to mothers of children in the program if they attended school regularly and did decently. School attendance did rise for families participating in this program, and students stayed in school longer.
Experiments are now ongoing in American public schools by my colleagues Steve Levitt and John List, along with Roland Fryer of Harvard, on motivating students by giving financial rewards directly to students rather than to parents. Although the studies are not yet completed, I would anticipate that students, especially older students, could be well motivated by monetary and other rewards for good performance.
Not surprisingly, teachers unions fight hardest against reforms that change the way teachers are paid, especially when they introduce incentives for teachers to perform more effectively. Teachers’ pay should tend to depend on education and experience, but it should also be sensitive to their revealed effectiveness as teachers. Teachers unions have for many decades fought merit pay that allows principals and other administrators to determine “merit” by their evaluations of how well teachers perform. The unions have claimed that this approach to merit would give higher pay not to teachers who do the best teaching, but to teachers who ingratiate themselves into the good graces of the administrators. Perhaps that argument has some merit in the traditional school system where administrators of neighborhood schools have some monopoly power, but it is far less compelling as administrators of public schools increasingly have to compete for students by offering better education.
In any case, the call now is for merit pay based on more objective criteria, such as students’ performance on standardized tests. Since students differ greatly in how well prepared they are for particular classes and subject matter, it is crucial to design a merit pay system that ties pay not to the absolute level of performance, but to the increment in performance added by different teachers. It may also be desirable to try to reduce “teaching to the test”, whereby teachers only emphasize materials that are included in the tests used to determine merit pay, although teaching to the test is valuable if doing well on the “test” requires knowledge of the important principles.
I do not want to minimize the difficulty of getting a well-designed system of merit pay, and Posner discusses many such difficulties. However, my colleague, Derek Neal, has proposed an attractive system of merit pay, where student performance at the end of the year is compared to that of students who perform about as well at the beginning of the year. Essentially, teachers then get a bonus that depends on the percentile ranking of their students at year-end compared with the performance of the comparable students. Other education specialists have different ways to determine merit pay that may be worth considering.
The disgraceful reaction of the LA teachers union to publication by the LA Times of the database that gives performance scores of the students of 6000 elementary school teachers is indicative of how teachers unions feel toward rewarding better teachers. The support by Arne Duncan, the US Secretary of Education, of the newspaper’s publication of this information is highly commendable. Not only should such information be published and publicized, but they should also be used to design a system where merit plays a sizable part in the monetary compensation of teachers.