Public School Teachers Are Not Underpaid, and There’s Probably Too Many of Them

“Teachers are underpaid.”  I hear this comment frequently from people in various circles when discussing education reform.  “It’s the most important job a person can have and we need to pay them accordingly,”  is another statement I hear frequently.  We hear it in Washington, DC and from special interest groups as well as Teresa Shumay points out at The Foundry:

Last year, U.S. Secretary of Education Arne Duncan stated that America’s public school teachers are “desperately underpaid” and called for a doubling of teachers’ wages. A similar theme is touted frequently by politicians, media, and education unions.

She shared an interview of The Heritage Foundation’s Jason Richwine for ChoiceMedia TV.  Dr. Richwine conducts quantitative analyses on a wide variety of social policy issues, among them immigration, education, welfare and family structure.

He basically says “time out” on that assumption.  What people typically don’t keep in mind are the fringe benefits that teachers receive.  Teacher compensation is more than just a cash salary.  Not only do they have great health benefits, but the public pensions they receive is greater than any private sector retirement plan.  (Side note be sure to check out Truth in Pensions on information about public pensions).  In a report he issued last fall on the subject Richwine and co-author, Andrew Biggs, PhD, noted the following when considering teacher compensation:

First, formal educational attainment, such as a degree acquired or years of education completed, is not a good proxy for the earnings potential of school teachers. Public-school teachers earn less in wages on average than non-teachers with the same level of education, but teacher skills generally lag behind those of other workers with similar “paper” qualifications. We show that:

• The wage gap between teachers and non-teachers disappears when both groups are matched on an objective measure of cognitive ability rather than on years of education.
• Public-school teachers earn higher wages than private-school teachers, even when the comparison is limited to secular schools with standard curriculums.
• Workers who switch from non-teaching jobs to teaching jobs receive a wage increase of roughly 9 percent. Teachers who change to non-teaching jobs, on the other hand, see their wages decrease by roughly 3 percent. This is the opposite of what one would expect if teachers were underpaid.

Second, several of the most generous fringe benefits for public-school teachers often go unrecognized:

• Pension programs for public-school teachers are significantly more generous than the typical private-sector retirement plan, but this generosity is hidden by public-sector accounting practices that allow lower employer contributions than a private-sector plan promising the same retirement benefits.
• Most teachers accrue generous retiree health benefits as they work, but retiree health care is excluded from Bureau of Labor Statistics benefits data and thus frequently overlooked. While rarely offered in the private sector, retiree health coverage for teachers is worth roughly an additional 10 percent of wages.
• Job security for teachers is considerably greater than in comparable professions. Using a model to calculate the welfare value of job security, we find that job security for typical teachers is worth about an extra 1 percent of wages, rising to 8.6 percent when considering that extra job security protects a premium paid in terms of salaries and benefits.

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.

So perhaps we should dispense with the “teachers are underpaid” talk.

Also, are there too many public school teachers?  Andrew Coulson, the Director of Cato Institute’s Center for Educational Freedom, believes so.  In an op/ed published today in The Wall Street Journal he wrote:

Since 1970, the public school workforce has roughly doubled—to 6.4 million from 3.3 million—and two-thirds of those new hires are teachers or teachers’ aides. Over the same period, enrollment rose by a tepid 8.5%. Employment has thus grown 11 times faster than enrollment. If we returned to the student-to-staff ratio of 1970, American taxpayers would save about $210 billion annually in personnel costs.

Or would they? Stanford economist Eric Hanushek has shown that better-educated students contribute substantially to economic growth. If U.S. students could catch up to the mathematics performance of their Canadian counterparts, he has found, it would add roughly $70 trillion to the U.S. economy over the next 80 years. So if the additional three million public-school employees we’ve hired have helped students learn, the nation may be better off economically.

To find out if that’s true, we can look at the "long-term trends" of 17-year-olds on the federal National Assessment of Educational Progress. These tests, first administered four decades ago, show stagnation in reading and math and a decline in science. Scores for black and Hispanic students have improved somewhat, but the scores of white students (still the majority) are flat overall, and large demographic gaps persist. Graduation rates have also stagnated or fallen. So a doubling in staff size and more than a doubling in cost have done little to improve academic outcomes.

….

The implication of these facts is clear: America’s public schools have warehoused three million people in jobs that do little to improve student achievement—people who would be working productively in the private sector if that extra $210 billion were not taxed out of the economy each year.

Coulson argues that we should eliminate non-productive government jobs and replace them with productive, private-sector jobs.  He says this must be done in order to avoid Greece’s fate.

Instead of talking about boasting teacher compensation perhaps we need to figure out how many we actually need instead.