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What I’m Reading Today, Teachers Are Overpaid Edition…

November 6th, 2011 · 21 Comments
Education · Markets · Policy

Long time readers may recall the think tank cartoon I posted a while back:

The Heritage Foundation is on the conservative side of this brawl, and I must say that it’s amazing how all of the objective, fact-based research that comes out of these sorts of organizations specifically supports the conservative ideology. (From what I’ve seen, the Brookings Institution isn’t quite as bad on this dimension, but there are certainly liberal think-tank-type organizations that are very ideologically driven.) In my own research, I’ve certainly reached conclusions that I’d rather not see, so I wonder sometimes what happens to all of the “inconvenient” results. 🙂

I bring this up because today’s reading does, in fact, come from the Heritage Foundation, and it’s about whether teachers are overpaid. Their answer is, not surprisingly, yes:

The teaching profession is crucial to America’s society and economy, but public-school teachers should receive compensation that is neither higher nor lower than market rates. Do teachers currently receive the proper level of compensation? Standard analytical approaches to this question compare teacher salaries to the salaries of similarly educated and experienced private-sector workers, and then add the value of employer contributions toward fringe benefits. These simple comparisons would indicate that public-school teachers are undercompensated. However, comparing teachers to non-teachers presents special challenges not accounted for in the existing literature.

I will restate the rest of the executive summary for you here:

  • Education degrees are easier than other degrees, so they shouldn’t count the same towards wages.
  • Teachers are stupider than other professionals (I kid you not) at a level that roughly matches with the lower wages earned by teachers.
  • Public-school teachers earn more than private-school teachers, so obviously public-school teachers are overpaid.
  • People who switch into teaching see a wage increase, while people who switch out of teaching see a wage decrease, which again suggests that teachers are overpaid.

I will acknowledge that, perhaps because both of my parents are teachers, or perhaps because I saw what my teachers had to put up with, I viscerally just don’t like conclusions that teachers are overpaid. That said, I am a scientist at heart, so a very large part of me just wants to fully understand the issue. So let’s go point by point:

Education degrees are easier than other degrees, so they shouldn’t count the same towards wages. On the surface, this is a pretty reasonable conclusion if the premise holds. There is, in fact, evidence that advanced degrees don’t significantly predict teacher quality, and the Heritage study shows evidence of grade inflation in education programs. I’m not entirely convinced that grade inflation, specifically in the form of a large percentage of people getting A’s, actually means that education programs are actually easier to finish, since I don’t have information on failure rates for education versus other programs. (Maybe the programs are giving lots of A’s and lots of F’s, for example.) I also don’t know how to account for the fact that education degrees are just as expensive as other degrees and many states require graduate study in various forms. If anything, I would like the evidence referenced here to be used to encourage states to rethink their requirements regarding education-specific education.

Teachers are stupider than other professionals at a level that roughly matches with the lower wages earned by teachers. My main issue here is one of consistency. In one paragraph, the Heritage study argued that education in and of itself shouldn’t be rewarded because there is not a clear relationship between level of education and teacher quality. In the next paragraph, on the other hand, the author argues that lower IQs or standardized test scores justify lower wages, despite the fact that no clear relationship between IQ and teacher quality has been established. Believe me, I would love it if one’s wages were primarily determined by IQ, but sadly this is not how the world works.

Public-school teachers earn more than private-school teachers, so obviously public-school teachers are overpaid. One of my professors once told his class that he had the best job in the world because it was the only one where there was an admissions process for his customers. At the non-university level, selective admission is a luxury that private schools have but public schools do not, and this difference casts doubt on the comparability of public and private school jobs. In fairness, the author of the study does mention this caveat in his analysis, but somehow it doesn’t seem to factor into his overall conclusion.

People who switch into teaching see a wage increase, while people who switch out of teaching see a wage decrease, which again suggests that teachers are overpaid. This is a dangerous comparison to make, largely in the same way that the “people who switch to GEICO save an average of $X on their car insurance” are misleading. Specifically, there’s no reason to believe that the people who chose to switch into or out of teaching are equivalent to those who made different choices. In particular, the finding that male teachers don’t experience salary decreases when they leave teaching makes me suspicious of the interpretation of this data, since it leaves open the possibility that women disproportionately leave teaching for less demanding or less time-consuming jobs.

The study then reaches the following conclusion:

We conclude that public-school-teacher salaries are comparable to those paid to similarly skilled private-sector workers, but that more generous fringe benefits for public-school teachers, including greater job security, make total compensation 52 percent greater than fair market levels, equivalent to more than $120 billion overcharged to taxpayers each year. Teacher compensation could therefore be reduced with only minor effects on recruitment and retention. Alternatively, teachers who are more effective at raising student achievement might be hired at comparable cost.

The author of the study mentioned the concept of compensating differentials when discussing private versus public school compensation, but he seems to have forgotten about it entirely by the time he reaches the overall conclusion. Am I the only one who thinks that working with kids all day is kind of exhausting? I may or may not be representative, but I find it hard to believe that the teaching versus office job decision is made under the assumption that public-school teaching and other jobs are equivalent on all dimensions other than money. If teaching were viewed as more pleasant than other jobs requiring similar skill levels, we would expect to see lower wages for teachers, and vice versa. (Didn’t anyone ever explain to you why garbage men make more money than most people would expect?)

Kayla Webley makes an important side point in her analysis of this study:

As Jonathan Chait notes in a piece titled, “You Get the Teachers You Pay For,” the paper doesn’t show that we pay teachers enough, it shows the skill level of teachers is commensurate with their pay level — an important distinction. “Pay teachers badly, and you’ll get a lot of bad teachers,” he writes.

This is a concept that is pretty well-understood in other markets. For example, if I wanted to buy furniture, I could be willing to pay a low price and get IKEA furniture, or I could be willing to pay a high price and get the option of having IKEA furniture or more high-quality furniture. Furthermore, if I were good at examining my furniture before I bought it, I could avoid paying high prices for IKEA-quality furniture. In a similar fashion, school districts are offering a wage and seeing who lines up to try to get the available teaching jobs. If this wage were “too high,” the districts would see more qualified people lining up for teaching jobs than there are jobs available, and if the wage offered were “too low,” the districts would see a shortage of qualified applicants.

Some people like to point out that unions play a large role in keeping wages artificially high. This is likely true in a lot of cases, and these cases are typically accompanied by a whole lot of people competing for comparatively few jobs. Based on what I’ve heard, this surplus of teachers does in fact exist in some districts, but it is certainly not a widespread phenomenon.

In a market economy, the forces of supply and demand determine whether prices are “too high” or “too low.” Isn’t the belief in the power of free markets am, um, conservative value? =P The fact of the matter is that teaching in a public school is, in large part, its own animal, so comparisons of the sort presented in this study are largely pointless. (It’s a little like asking whether the price of corn oil is too high relative to the price of corn syrup- yes, corn can be used for either of these purposes, but if making corn syrup is somehow more or less icky than making corn oil, we shouldn’t expect the prices of the two items to be equal.) Instead, effort would be better put towards determining what the appropriate level of teacher quality is and designing a system that would attract enough of that type of teacher while weeing out their less effective counterparts.

Tags: Education · Markets · Policy

21 responses so far ↓

  • 1 Steve_0 // Nov 6, 2011 at 6:31 pm

    Without a market, the question and all rebuttals are irrelevant. Just go make 60,000 shoes, comrade.

  • 2 Clay // Nov 6, 2011 at 6:31 pm

    Agree with your friends analysis. Bad pay = bad teachers over time. Your buddies at McK did a good analysis of this – showing where US teachers rank in their high school classes (bottom 30%) vs other countries (Korea = top 10%). Teaching isn’t a celebrated or compensated profession in US, so you get what you pay for.

    http://bit.ly/uzql3k McK Study

    More commentary from NYT et al – http://nyti.ms/fHiM2C
    http://nyti.ms/uwLMfo

  • 3 Rev. Pfloyd // Nov 6, 2011 at 6:49 pm

    I think some chunk of it would entail the fact that wage flexibility in the public-sector education industry is pretty rigid. I think there *are* some teachers who are overpaid and certainly some teachers who are underpaid. But, alas, their value doesn’t reach a “market equilibrium” because their salary is not tethered to their actual value.

  • 4 Warren J // Nov 6, 2011 at 9:38 pm

    There is also the non-monetary cost and compensation of teaching in a public school. There is an added cost of having to deal with the excessive amount of nonsensensical bureaucratic decisions, both of the school district and the state that funds schools. These are a real pain in the arse for public school teachers to deal with. However, there is also the compensation of job security, something that is proving to be incredibly important this day and age.

    Are public school teachers over- or underpaid? Just look at the job market. How difficult is it for public schools to find teachers at current compensation rates? That’s a regional question. Around here, where we have a teacher school at our University, there is clearly an oversupply of teachers compared to open positions. Elsewhere? I don’t know.

  • 5 Jeff // Nov 7, 2011 at 5:30 am

    It seems to me that one huge fundamental flaw with the Heritage Foundation’s analysis comes down to their opening assumption: “The teaching profession is crucial to America’s society and economy, but public-school teachers should receive compensation that is neither higher nor lower than market rates.”

    They’ve ignored the issue of externalities – specifically, that society as a whole gains some benefit from a teacher that it doesn’t gain from a similarly-qualified office worker. You may be a complete stranger with no direct connection the school or children being taught, but it’s not at all hard to see how you would still benefit from living in a community of well-educated youngsters.

  • 6 Jake Lopata // Nov 7, 2011 at 10:52 am

    Good Post, But the idea of linking our wages to our IQ would be a very bad idea. Few reasons:

    -new form of discrimination
    -creates more class rigidity (more defined classes; Smart vs. Dumb people)
    -decreased income mobility

    What is the purpose of the intelligence test?

    http://www.schoolpsychologistfiles.com/iqFaq.html

    Further more, we are already paid relative to our assumed intelligence (HS,BA,MA,Phd), wages increase respectfully. Degrees give us the option of obtaining higher wages.

    here is a fun website if you want to see what Professors and teachers make in NY.

  • 7 Jake Lopata // Nov 7, 2011 at 10:53 am

    http://seethroughny.net/

    forgot to paste it haha, enjoy

  • 8 Punditus Maximus // Nov 7, 2011 at 6:06 pm

    Conservatives think the following groups are overpaid by definition:

    1) Caregivers,
    2) People who work for a living, and
    3) People whose work contributes to society.

    So, yeah, the conclusion well preceded the analysis.

    Wouldn’t the fact that American students consistently score below students of other countries in tests of educational attainment kind of close the discussion? The output is low quality, so you are using either too little or not high enough quality inputs. Teachers are either overworked or underpaid or (most likely) both.

  • 9 Colin W // Nov 7, 2011 at 9:25 pm

    Well, first and foremost, if teachers are “over-paid”, they can’t be “stupider than other professionals ” – they’re smart for gaming the system.

    With that being said, I’ll simply point out a few reasons why I tend to agree with the article (although, I will caveat that this may be regional, but these facts provide huge implications to the regional issues at stake):

    Many schools in my area have union reps as teachers – they earn in excess of 100,000 to teach one class a day and in some schools, they are only a co-teacher for that class.

    Many teachers earn additional income through working during lunch or being a coach – Because this does not fall within their contract, they are paid overtime even though they are still working within their contract hours. I did not see this addressed in the study and for these teachers, their salary would appear artificially lower in the study than it is in real life.

    This study makes no mention of co-teachers, and therefore has no variable to show any division of labor that certain schools may provide for their teachers by allowing teachers to distribute work amongst themselves. My regional area often utilizes co-teachers and one may arguably suggest they “work” less than other schools where a teacher has a full class to teach by themselves.

    And then we fall into the whole union issue which affords less effective teachers tenure so that they may not be replaced by more effective workers. This provides teachers less incentive to be 100% effective (and economics dictates we should expect such a response – why work more when you don’t have to)?

    I wish there was a market system in place for teachers. I wouldn’t mind paying more effective teachers even more money if they get the job done. Unfortunately, my region has shown me that highly effective teachers are not the norm, yet highly compensated salaries are.

  • 10 RickH // Nov 8, 2011 at 12:48 pm

    Colin, which region are you in? I am not a public school teacher now because I could not afford to be one. In Utah, a first-year music teacher that works through the summer and after school teaching marching and/or jazz band can expect $30k, tops. I realized that I could earn more than that in the private sector and not have to go through the student teaching program (which would not allow me to work at my full-time job that provided health insurance for my two immune compromised children). So I changed my major from music education to just music in my last semester and became a government contractor.

  • 11 A // Nov 8, 2011 at 5:31 pm

    This is just the first in a series of Heritage Foundation studies. The first ones will show that all government employees are overpaid compared to the market / private enterprise.
    Future ones then will show that even private-sector workers are overpaid (compared to international market rates).
    The concluding study will then summarize that 99% of American workers are overpaid, and 1% are underpaid, proving what we always knew, namely, that the poor have too much money, and the rich not enough.

  • 12 The Surprising Usefulness of Teachers | Just Above Sunset // Nov 9, 2011 at 4:08 am

    […] The economist Jodi Beggs – young and pretty and smart and a lively writer, and the daughter of two teachers – really rips into these Heritage Foundation guys: […]

  • 13 Amarsir // Nov 9, 2011 at 8:21 pm

    Have there been any studies on the quality of blog comments as a function of post age?

    @Jeff, I don’t think your externality theory follows through. Let’s grant that education is a high-value activity. That a school contributes more to society than an office. I don’t see why that would come out as above-value pay for teachers. They don’t pay more for pencils. They don’t pay more for electricity. Why would the pay more for workers?

    Or to put it differently, if a school is “more valuable” (and I’m not sure how you’d measure that) why would it translate into higher pay and NOT simply more teachers? The value of the output does not on it’s own increase the price of the inputs.

    ——

    Anyway, I didn’t much care for the IQ argument either. (I’d like to give benefit of the doubt since it was a summary, but I trust your write-ups.). And I think they missed a fair comparison that would have strengthened the argument. Since the 70s the number of advanced degrees has increased and the pay has gone up commensurate with them but education quality has not shown any measurable increase. But then to be fair they’d have to change the argument from “teachers are overpaid” to “teachers are overbought.”

  • 14 Jeff // Nov 10, 2011 at 2:47 pm

    @Amarsir, I see what you’re saying, but I think you’re missing the point of an externality. Yes, they pay the same for pencils and electricity. We could even assume they pay similar market rates for their benefits (delux as they may be), and the like. But they end up being paid less than they’re “worth” to society because of the externalities that aren’t accounted for by either the school or the teacher.

    The classic example of course is pollution, where a company manufactures something based (in theory) on the marginal cost equaling the marginal revenue. But since the company isn’t charged for the pollution emitted by each new unit of production, even though the pollution actually does have a cost to society, the company ends up over-producing and over-polluting.

    So I’m saying good teaching has a very large benefit to society that isn’t accounted for in their pay, because it isn’t really a benefit directly to the school or to the teacher – it’s a benefit to the rest of us. Thus, teachers should make more than the market rate would indicate.

  • 15 Amarsir // Nov 11, 2011 at 2:48 pm

    Yes but you’re trying to trace the output externality to the value of inputs. Doing the same thing to the classic polution example would require us to say that workers are less valuable when they work at a polluting plant. That strikes me as a rather unorthodox Interpretation.

    We could certainly say that externalities lead to inefficient allocation, but as I said in the first reply that should result in quantity produced not price of inputs. I doubt there’s any school administrator who wouldn’t prefer 100 teachers at 40k to 80 teachers at 50k. There has to be a labor market restriction that prevents them from competing into that position and althoug I don’t like to snap-blame unions, they do fit that description much better than production externalities.

    (Now if you said people like to live in a town where teachers are well-paid, THAT would be a labor-affecting externality.)

  • 16 Chuck Dolci // Nov 26, 2011 at 1:27 am

    Seems to be some bad facts and weak reasoning on both sides of this issue.

    Having seen this from both sides (being in executive level positions in private industry for nearly 30 years and, after retiring, being a public high school teacher for the last 6 years) I can attest to the fact that (with qualifications) “Yes” teachers are more stupid than professionals in private industry. Teachers hold themselves out as being professionals, so they should be judged on that basis. Private industry has more than its share of stupid people, but public education seems to be particulalry attractive to that class of people. As I made my transition from industry to academia it was quite a while before I encountered anyone who I would have considered even moderately competent.
    Let us also consider what we mean by “stupid” Precisely what does that mean? I have never seen any standard (other than IQ tests such as ACT and SAT). And I am not so sure that stupidity is the issue. There may be lots of bright people in academia, but the problem is that there is absolutely no incentive to excel or rise above the average. For starters, there is no one to hold teachers accountable. Teachers, literally have no bosses. They are not answerable to the Administration. Teachers’ unions and tenure make it all but impossible to fire anyone. Pay is determined by degree, college credits and length of time in the job. There is no incentive for anyone to excel.
    Teachers may not be more stupid than everyone else, but they sure act that way. Also, the data shows that students majoring in education have among the lowest SAT scores – see http://professionals.collegeboard.com/profdownload/2010-total-group-profile-report-cbs.pdf page 13. This hasn’t changed in years.
    As far as pay – let me tell you, teachers get paid pretty well both for the number of hours they put into the job and the results they produce. Don’t tell me that teachers spend lots of time after hours preparing for classes and grading papers. If you believe that then I have a bridge to sell you. (And, please. Yes, we all know that there are some teachers who do go the extra mile and do spend the time and effort – but get real here folks. We are talking about the vast majority of teachers in our public schools, and they do not spend all their out of class time (or ANY out of class time) grading papers and preparing lesson plans. After a couple of years many of them just coast, teaching the same material, handing out the same homework and administrering the same tests, year after year.)
    The number of holidays is staggering, plus two weeks off at Christmas, another week off for Winter Break, another week off for Spring Break, plus two and a half months off during the summer.
    And while we are talking about pay – someone ought to put a dollar value on all the perks of the job. In addition to a tremendous benefit plan, and a great retirement plan, what about the value of the intangibles, such as job security (tenure), flexibility that is allowed by the part time nature of the work (when I leave at the end of the day, there are only three people still on the campus – the two janitors and I) a totally predictable schedule that allows them to plan their days and their weekends – and, as I mentioned, all the days off. What would it cost the school district to buy back all those little goodies and treat their workers like workers in private industry? A pretty penny.
    And the basic pay ain’t too shabby (see http://www.esuhsd.org/documents/Human_Resources/2010-2011_Certificated_Salary_Schedule_-177_Days-.pdf)
    $95,000 to work only 177 days out of the year.
    While we are on the subject of pay – the argument is always made that if we pay teachers more, we will get better teachers. Really? If we pay teachers more all we will have is a bunch of highly paid incompetent teachers. How do you get rid of all the incompetent teachers to make room for the good prospects? And once you have attracted the better teachers, what incentive do they have to stay “good” since they will be in exactly the same environment as we have now? Smart people get lazy too, unless you can effectively hold their feet to the fire.
    ’nuff said.

  • 17 Jake Lopata // Dec 9, 2011 at 10:39 am

    Chuck,
    Maybe we should consider a system like universities have. Professors don’t get tenure unless they earn it by doing research.

    The systems are both very different, but perhaps there are some lessons to be learned about creating an incentive for teachers to excel.

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  • 21 Rolin // Apr 1, 2015 at 4:58 pm

    It depends on results as if they are good then I don’t consider what teachers are paid but if the results are not coming and still there are huge payments needed then I don’t like it. I am getting trained in Forex trading without any cost all thanks to OctaFX broker with their excellent Champion demo contest platform as with this I can compete with some of the best and if I don’t win any prize I earn handsome experience which is bigger than money.

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