Pay Scales and Performance Pay

2015 Retaining Effective Teachers Policy

2015 Goals for Pay Scales and Performance Pay

While giving local districts authority over pay scales, the state should ensure that effectiveness is a factor in teachers' compensation.

Best practices

Florida allows local districts to develop their own salary schedules while preventing districts from prioritizing elements not associated with teacher effectiveness. Local salary schedules must ensure that the most effective teachers receive salary increases greater than the highest salary adjustment available. Indiana and Utah also both articulate compensation policies that reward effective teachers by requiring performance to be the most important factor in deciding a teacher’s salary.

Best practice 3


Meets goal 0


Nearly meets goal 6


Meets goal in part 13


Meets a small part of goal 23


Does not meet goal 6


Progress on this goal since 2013

  • Improved
  • Stayed the same
  • Regressed

What role do states play in deciding teacher pay rates?

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State allows districts to set their own salary schedules.: AK, AZ, CO, CT, DC, FL, IN, KS, LA, MD, MI, MN, MT, ND, NE, NH, NV, NY, OR, PA, RI, SD, UT, VA, VT, WI, WY

State sets the minimum salary a teacher must earn but leaves the rest to districts.: CA, IA, ID, IL, MA, ME, MO, NJ, NM

State sets minimum salary schedule: AL, AR, DE, GA, HI, KY, MS, NC, OH, OK, SC, TN, TX, WA, WV

How we graded

Research rationale

Compensation reform can be accomplished within the context of local control.
Teacher pay is, and should be, largely a local issue. Districts should not face state-imposed regulatory obstacles that prevent them from paying their teachers as they see fit; different communities have different resources, needs and priorities. States should remove any barriers to districts' autonomy in deciding the terms for teacher compensation packages.

The state can ensure that all teachers are treated fairly by determining a minimum starting salary for all teachers. However, a state-mandated salary schedule that locks in pay increases or requires uniform pay deprives districts of the ability to be flexible and responsive to supply-and-demand problems that may occur.

While leaving districts flexibility to decide their own pay scales, states should promote compensation tied to teacher effectiveness and discourage districts from basing pay solely on criteria not correlated with teacher effectiveness.
Across the country, state and district salary schedules are based primarily on just two criteria: advanced degrees and years of experience, neither of which is correlated with teacher effectiveness. The impact of advanced degrees on teacher performance has been studied extensively, and research has shown that such degrees generally do not make teachers more effective. Years of experience do have an impact on teacher effectiveness very early in a teacher's career, but this effect is gone after the first few years of teaching. Because of their predominance in current salary schedules, states need to take a proactive role in preventing districts from basing teacher pay primarily on these two criteria.

Performance pay is an important recruitment and retention strategy.
Performance pay provides an opportunity to reward those teachers who consistently achieve positive results from their students. The traditional salary schedule used by most districts pays all teachers with the same inputs (i.e., experience and degree status) the same amount regardless of outcomes. Not only is following a mandated schedule inconsistent with most other professions, it may also deter talented individuals from considering a teaching career, as well as high-achieving teachers from staying in the field, because it offers no opportunity for financial reward for success.

States should set guidelines for districts to ensure that plans are fair and sound.
Performance pay plans are not easy to implement well. There are numerous examples of both state and district initiatives that have been undone by poor planning and administration. The methodology that allows for the measurement of teachers' contributions to student achievement is still developing, and evaluation systems based on teacher performance are new in many states. Performance pay programs must recognize these limitations. There are also inherent issues of fairness that should be considered when different types of data must be used to assess the performance of different kinds of teachers.

States can play an important role in supporting performance pay by setting guidelines (whether for a state-level program or for districts' own initiatives) that recognize the challenges in implementing a program well. A few states now require that districts build performance into salary schedules, moving away from bonus structures that teachers know may be subject to budget constraints and competing priorities.

Pay Scales and Performance Pay: Supporting Research
For evidence that degree status does not increase teacher effectiveness and should therefore not be automatically rewarded in teacher salary schedules, see the following:
C. Clotfelter, H. Ladd and J. Vigdor, "How and Why do Teacher Credentials Matter for Student Achievement?", NBER, Working Paper No. 12828, January 2007; S. Rivkin, E. Hanushek, and J. Kain, "Teachers, Schools, and Academic Achievement." Econometrica, Volume 73, No. 2, March 2005, pp. 417-458; R. Ehrenberg and D. Brewer, "Do School and Teacher Characteristics Matter? Evidence from High School and Beyond," Economics of Education Review, Volume 13, No. 1, March 1994; pp. 1-17. (Ehrenberg and Brewer found that an increase in the percentage of teachers with master's degrees was associated with lower gains among white students but higher gains among black students.); R. Murnane, The Impact of School Resources on the Learning of Inner City Children, 1975, Balinger Publishing Company, Cambridge, MA; H. Kiesling, "Assignment Practices and the Relationship of Instructional Time to the Reading Performance of Elementary School Children," Economics of Education Review, 1984, Volume 3, No. 4, pp. 341-50. B. Rowan, R. Correnti, and R. Miller, "What Large-scale, Survey Research Tells Us About the Teacher Effects on Student Achievement: Insights from the Prospects Study of Elementary Schools," Teachers College Record, Volume 104, No. 8, November 8, 2002 pp. 1525-1567. R. Ferguson, "Paying for Public Education: New Evidence on How and Why Money Matters," Harvard Journal on Legislation, Volume 28, Summer 1991, pp. 465-498. D. Goldhaber and D. Brewer, "Evaluating the Effect of Teacher Degree Level on Educational Performance," Developments in School Finance, ed. W. Fowler, U.S. Department of Education, National Center for Education Statistics, 1996, pp. 199-210.

For data on the high cost of salary differentials based on advanced degrees, see M. Roza and R. Miller, July 20, 2009, "Separation of Degrees", Center for American Progress.

For evidence that experience does not directly correlate with teacher effectiveness, and therefore should not be the sole determinate of the highest steps on a pay scale, see the following:
J. King Rice "The Impact of Teacher Experience: Examining the Evidence and Policy Implications." Calder Institute, August 2010, Brief 11; S. Rivkin, E. Hanushek, and J. Kain, "Teachers, Schools, and Academic Achievement." Econometrica, Volume 73, No. 2, March 2005, pp. 417-458; C. Clotfelter, H. Ladd, and J. Vigdor, "How and Why Do Teacher Credentials Matter for Student Achievement?" NBER, Working Paper No. 12828, January 2007; S. Kukla-Acevedo, "Do Teacher Characteristics Matter? New Results on the Effects of Teacher Preparation on Student Achievement." Economics of Education Review, Volume 28, 2009, pp. 49-57; E. Hanushek and S. Rivkin, "How to Improve the Supply of High Quality Teachers." 2004, Brookings Institute: Brookings Papers on Education Policy, pp. 7-44.

For information about alternative compensation for teachers, see the following:
Teaching Commission and USC California Policy Institute, "Understanding Alternative Teacher Compensation," USC California Policy Institute, 2005; J. Azordegan, P. Byrnett, K. Campbell, J. Greenman, and T. Coulter, "Diversifying Teacher Compensation", The Teaching Commission and Education Commission of the States," ECS, December 2005; Minnesota Department of Education, "Q Comp: Quality Compensation for Teachers", February 2009.

Research on merit pay in 28 industrialized countries from Harvard's Program on Education Policy and Governance found that students in countries with merit pay policies in place were performing at a level approximately one year's worth of schooling higher on international math and science tests than students in countries without such policies (2011).

Erik Hanushek found that a teacher one standard deviation above the mean effectiveness annually generates $400,000 in student future earnings for a class size of 20. See E. Hanushek, "The Economic Value of Higher Teacher Quality," National Bureau of Economic Research, Working Paper 16606, December 2010.

In addition, numerous conference papers published by the National Center on Performance Incentives reinforce the need to recognize the limitations and appropriate uses of performance pay. See: