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Quack Off
by
Free Market
Duck
Public
School Teachers Aren't Underpaid
by Andrew G. Biggs & Jason
Richwine
Wall Street Journal
(Nov
09, 2011)
Washington, DC -- A common story line in American
education policy is that public school teachers are underpaid—"desperately
underpaid," according to Education Secretary Arne Duncan in a recent speech.
As former first lady Laura Bush put it: "Salaries are too low. We all know
that. We need to figure out a way to pay teachers more."
Good teachers are crucial to
a strong economy and a healthy civil society, and they should be paid at a
level commensurate with their skills. But the evidence shows that public
school teachers' total compensation amounts to roughly $1.50 for every $1
that their skills could garner in a private sector job.
How could that be? First,
consider salaries. Public school teachers do receive salaries 19.3% lower
than similarly-educated private workers, according to our analysis of Census
Bureau data. However, a majority of public school teachers were education
majors in college, and more than two in three received their highest degree
(typically a master's) in an education-related field. A salary comparison
that controls only for years spent in school makes no distinction between
degrees in education and those in biology, mathematics, history or other
demanding fields.
Education is widely regarded
by researchers and college students alike as one of the easiest fields of
study, and one that features substantially higher average grades than most
other college majors. On objective tests of cognitive ability such as the
SAT, ACT, GRE (Graduate Record Examination) and Armed Forces Qualification
Test, teachers score only around the 40th percentile of college graduates.
If we compare teachers and non-teachers with similar AFQT scores, the
teacher salary penalty disappears.
While salaries are about
even, fringe benefits push teacher compensation well ahead of comparable
employees in the private economy. The trouble is that many of these benefits
are hidden, meaning that lawmakers, taxpayers and even teachers themselves
are sometimes unaware of them.
Data on employee benefits
from the Bureau of Labor Statistics (BLS), for example, do not include
retiree health coverage, which for teachers is worth about an additional 10%
of their salaries. Because of differing accounting rules between the public
and private sectors, BLS data also make teachers' defined-benefit pensions
appear only slightly more generous than the typical 401(k) plan found in the
private sector.
In reality, a teacher who
retired after 30 years of service with an annual salary of $40,000 might
receive guaranteed annual pension benefits of about $20,330. Under a typical
private 401(k) plan, a guaranteed annual benefit might be only around $4,450
(assuming the money is invested in U.S. Treasurys and the employee buys an
annuity).
BLS data on paid leave for
teachers count vacation days only during the school year, omitting summer
and long holiday breaks. A valid pay comparison should include this extra
time off, in which teachers can enjoy longer vacations or earn additional
income.
Properly counted, a typical
public school teacher with a salary of $51,000 would receive another $51,480
in present or future fringe benefits. A worker in private business with the
same salary would receive around $22,185 in fringe benefits.
Finally, despite recent
layoffs, teachers still have greater job security than workers in private
businesses. While employment in education declined by 2.9% between September
2008 and July 2011, according to BLS data, overall private-sector employment
declined by 4.4%. Moreover, from 2005 through 2010 the unemployment rate for
public school teachers averaged 2.1%, versus 4.1% for private school
teachers and 3.8% for occupations that some consider comparable, such as
computer programmers and insurance underwriters.
Job security protects
against the loss of compensation suffered by the unemployed, and it also
protects a position in which total wages and benefits are on average above
market levels. This job security is surely valuable.
Consider that one-fifth of
the highest-performing public school teachers in Washington, D.C., recently
declined to give up even part of their job security in exchange for base
salary increases of up to $20,000. According to our model—which factors in
the probability of becoming unemployed, the average duration of
unemployment, the level of unemployment insurance benefits, and the risk
aversion of public employees—job security is worth about an estimated extra
9% of compensation.
One important caveat: Our
research is in terms of averages. The best public school teachers—especially
those teaching difficult subjects such as math and science—may well be
underpaid compared to counterparts in the private sector.
Nevertheless, most public
school teachers would not earn more in private employment. According to our
analysis of the Census Bureau's Survey of Income and Program Participation,
the average person who moves into teaching receives a pay increase of almost
9%, while the average teacher who leaves for the private economy must take a
pay cut of over 3%.
This is the opposite of what
we would expect if teachers were underpaid. It also helps explain why more
people seek teaching jobs—as measured through the number of teaching
graduates and applications for teaching positions—than can possibly find
them.
In short, combining
salaries, fringe benefits and job security, we have calculated that public
school teachers receive around 52% more in average compensation than they
could earn in the private sector.
The compensation premium is
especially relevant today, as states and localities struggle with budget
deficits. Restraining the growth of teacher compensation—in particular,
pension and retiree health benefits that outstrip what comparable
private-sector workers receive—could help balance budgets and perhaps
restore school resources lost to rising labor costs. Broader pay reform
should give school administrators greater flexibility to reward the best or
most-needed teachers with high salaries and benefits, while encouraging the
least effective ones to improve or to leave the profession.
Effective reform, however,
requires knowing all the facts about teacher pay. Policy makers and the
public should not accept at face value that the typical teacher earns far
less than he or she would in the private sector. The evidence points to a
very different conclusion.
Mr. Biggs, a resident
scholar at the American Enterprise Institute, and Mr. Richwine, a senior
policy analyst at the Heritage Foundation, are authors of the new paper,
"Assessing the Compensation of Public School Teachers" (aei.org/paper/100259).
–
FM Duck
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