Just last September, a study from Vanderbilt's National Center on Performance Incentives found no correlation between performance pay and improved student achievement. A couple of new studies, including another one from Vanderbilt, draw opposite conclusions, but somehow they haven't grabbed the attention of the national media.
This most recent Vanderbilt study finds that when school districts design their own performance pay programs, student achievement does increase, progress is made on closing the achievement gap, and retention of the most successful teachers improves. Pay plans that awarded larger bonuses, and in which teachers felt they were more likely to receive bonuses, worked the best.
The new study seems to address many of the concerns raised by Vanderbilt's September report. We and others criticized the design, in part for focusing on a program that offered teachers a bonus for increased test scores without also providing support that would help teachers to improve. In addition, in the original design, only the teachers who received the bonuses knew that they had earned them, ignoring an opportunity to publicly reward successful teachers. The bonus program seemed to assume that teachers ordinarily hold back from doing their best, and that money alone would be sufficient incentive for teachers to improve their students' learning. Not surprisingly, the teachers who participated in the study did not feel that their efforts were fairly rewarded.
An additional international study also provides support for performance pay. According to a study of 28 OECD countries, math and reading scores of 15-year-olds in countries with performance pay are significantly higher, with science scores slightly higher. However, other forms of differentiated pay, such as stipends for working in tough conditions, taking on additional responsibilities or having advanced qualifications or training, were all found to have no significant effect on student achievement.