Study: Public School Teachers Highly Overpaid

Published November 2, 2011

Public school teachers make one-and-a-half times the salary and benefits of comparable professionals, a discrepancy that amounts to “overcharging” U.S. taxpayers $120 billion each year, according to a new study.

“Our findings are opposite to the widespread perception that teachers are underpaid,” said study coauthor Jason Richwine. Coauthor Andrew Biggs said their analysis includes “more objective measures” than other analyses, such as controlling for credential inflation, including benefits as a form of compensation, analyzing better job and pension security for teachers, and incorporating more extensive time off for teachers than professionals in comparable occupations. 

Forty-two states and Washington DC currently have approximately $103 billion in projected budget deficits, due in great part to state pension and healthcare costs. Tax revenues are likely to remain stagnant for several years, and the federal government owes nearly 90 percent of U.S. gross domestic product.

Those difficulties have led more than half of the states to cut education funding in their most recent legislative sessions, to loud outcry from teachers’ unions and proposals such as President Obama’s to pump $30 billion into preventing teacher layoffs.

“Part of the [misperception about teachers’ compensation] is we lack good data,” said Andrew Kelly, an education research fellow at the American Enterprise Institute.

High Job Security, Despite Recession
Biggs’ and Richwine’s study supplies that data, showing teachers averaged 2.1 percent unemployment between 2005 and 2010, half the rate among comparable peers.

Since teachers earn much more than they could in the private sector, they are not likely to flee the profession if their compensation is brought more in line with the private sector, the authors conclude.

“Does this mean we should go out and arbitrarily cut teachers’ salaries? No,” Biggs said. “It does mean that if you reduce pensions or health insurance benefits through reform, you shouldn’t be concerned you’re reducing teacher pay or getting more teachers to quit.”

From September 2008 to July 2011, which includes the recent recession, local government education employment declined 2.9 percent while private employment declined 4.4 percent, according to Bureau of Labor Statistics figures.

Objectively Evaluating Salaries
The Heritage Foundation-AEI study compares both salaries and overall compensation. Richwine and Biggs control for education levels, note public school teachers on average earn 10 percent more than private-school teachers, and incorporate data showing those who enter teaching earn 9 percent more than previous wages and when leaving teaching take a 3 percent pay cut.

Because research has repeatedly demonstrated education is less rigorous an academic field than others—education school graduates score lower on tests such as the ACT and GRE but get much higher college grades than their peers—the study coauthors chose not to use graduate degrees or certifications to compare teachers with non-teachers. Instead, they controlled for cognitive ability using the National Longitudinal Survey of Youth. 

“It’s fairly clear teachers are not underpaid by salaries, and may in fact be overpaid,” Richwine said. “But benefits are the ones that really put teachers over the top.”

‘Over the Top’ Benefits
Using only BLS data is likely to understate teachers’ compensation compared with the private sector, because it fails to adjust for different pension accounting in the public sector, excludes retiree health coverage (which most public workers receive and private workers do not), and does not account for teachers’ much shorter work year.

“[A] teacher can expect to receive retirement benefits roughly 4.5 times higher than she would receive from a typical private-sector pension,” the report says. Adjusting for these factors that make teacher compensation different, the report concludes teacher benefits are more than double private-sector benefits.

“Are benefits being chosen to be emphasized because you can kick the can on them down the road?” wonders Robert Costrell, a professor of education reform and economics at the University of Arkansas, when considering why teachers receive such outsized benefits.

“The Biggs-Richwine paper is extremely valuable because it debunks a long series of work [on teacher pay] and shows how really misguided a lot of this work is,” Costrell said.

Fixing the Disparity
Teacher pay is inflated largely because school administrators lack the flexibility to hire and fire teachers as their schools need, the report says. The inflexibility and emphasis on poor measures of quality such as experience and certifications in union contracts help secure overcompensation for the average teacher while leaving the most valuable teachers underpaid, the report continues.

“There are two levels to pay reform,” Richwine said. “On the basic level, what existing teachers are paid: too much or too little. Then the second question [is] what we should pay our best teachers. We can’t answer that question today, but this paper is a first step.”

The paper and its authors recommend “flexible school models” such as expansion of charter schools and implementing vouchers as measures most likely to address the teacher pay imbalance because these allow parents and administrators to attract and retain the most effective teachers.

“State and local governments seeking to balance their budgets in difficult times should take a close look at teacher compensation, which is considerably higher than necessary to retain the existing teacher workforce,” the paper concludes. 

Internet Info:
“Assessing the Compensation of Public-School Teachers,” Andrew Biggs and Jason Richwine, November 1, 2011:

“Are Public School Teachers Overpaid?” videos of a discussion on the Biggs-Richwine paper, The American Enterprise Institute:

Image by Evan Jackson.