The Economics of Teacher Quality

Published May 1, 2004

“Bad money drives out good.” Gresham’s Law

As a result of unionization, pay differentials between high-aptitude and low-aptitude teachers have disappeared over the past 50 years. According to a new study, one unfortunate consequence of this pay compression has been to push high-aptitude teachers out of the teaching profession.

The researchers, Caroline M. Hoxby and Andrew Leigh, both of Harvard University, were troubled by evidence reported in 2002 by another researcher, University of Maryland economics professor Sean P. Corcoran, that the percentage of high-aptitude women in teaching had declined significantly. Corcoran found the likelihood that a female from the top of her high school class would eventually enter teaching had fallen dramatically from 1964 to 1992–from almost 20 percent to 4 percent–while the percentage of women in the profession had stayed steady at around 75 percent.

In their recent paper, “Pulled Away or Pushed Out? Explaining the Decline of Teacher Aptitude in the United States,” Hoxby and Leigh explain how they tested two possible hypotheses for having fewer high-aptitude women in teaching:

  • the “pull” of getting better pay for higher aptitude in other professions; and
  • the “push” of getting no better pay for higher aptitude in teaching (“wage compression”).

When they began their study, the Harvard researchers expected the “pull” hypothesis would explain most of the decline in teachers’ aptitude. They were wrong.

“The evidence suggests that compression of teaching wages is responsible for about three-quarters of the decline in teacher aptitude,” they concluded. “Females’ opportunities in alternative occupations do matter, but opportunities improved rather similarly for females of all aptitudes.”

Teacher quality also concerned The Teaching Commission, which released its report, “Teaching at Risk: A Call to Action,” in January 2004. Established by former IBM chairman Louis V. Gerstner, Jr., the high-profile commission said its aim was “to break the cycle in which low-performing college students far too often become the teachers of low-performing students in public schools.” College graduates whose SAT and ACT scores are in the bottom quartile are more than twice as likely as those in the top quartile to major in education.

The commission report argues the nation must increase base pay for teachers and that teachers must be measured and compensated based on their classroom performance, with substantial increases for teachers who raise student achievement. (See “Gerstner Commission Endorses Teacher Merit Pay,” School Reform News, April 2004.)

A specific example of The Teaching Commission’s influence can be seen in Schools Chancellor Joel Klein’s recent call for changing the way teachers are paid in New York City. Klein proposed teacher bonuses based on student achievement and higher salaries for teachers who work in troubled schools or difficult-to-staff fields like math and science.

“Lockstep pay, seniority, and life tenure” are the heart of the problem, said Klein in a January 2004 speech, sponsored by Crain’s New York. “Together they act as handcuffs and prevent us from making the changes that will encourage and support excellence.”

Lisa Snell is director of the education program for the Reason Foundation in Los Angeles. Her email address is [email protected].

For more information …

Caroline M. Hoxby and Andrew Leigh’s December 2003 paper, “Pulled Away or Pushed Out? Explaining the Decline of Teacher Aptitude in the United States,” is available online at

The August 2002 paper by Sean P. Corcoran, William N. Evans, and Robert S. Schwab, “Changing Labor Market Opportunities for Women and the Quality of Teachers 1957-1992,” is available online at

The January 2004 report of The Teaching Commission, “Teaching at Risk: A Call to Action,” is available online at