Teachers Earn More Than They Would in the Private Sector

Andrew G. Biggs is a resident scholar at the American Enterprise Institute, and Jason Richwine is a senior policy analyst at the Heritage Foundation.

Updated January 2, 2013, 3:38 PM

Our research has shown that public school teachers receive salaries about on par with private sector workers who score the same on the SAT and other standardized tests of cognitive skill. But fringe benefits — in particular, generous vacation time, pensions and retiree health plans — push total compensation for teachers roughly 50 percent above private sector levels.

Of course, formal tests like the SAT do not capture all of the skills needed to be an effective teacher, or a good worker. But if teachers are being underpaid for their noncognitive skills, like communications or organization abilities, we would expect that teachers who shifted to private sector jobs would receive a significant raise. This does not happen. The average teacher suffers a slight decrease in salary upon leaving the profession, and likely a greater reduction in fringe benefits. Simply put, the average teacher would not earn more in a private sector job.

Public school teachers already are compensated above fair market rates. To those who say schools need to pay more for recruiting purposes, we say: The extra money is already there, but teacher quality has not risen to match it. This implies a fundamental problem with how teachers are hired. Past research indicates that even large across-the-board pay increases would do little to improve teacher quality.

Rather than spending even more taxpayer money inefficiently, policymakers should change how school funds are used. Merit pay to reward the best teachers would be a good start. But merit pay must be part of fundamental reforms to help schools hire, promote and fire teachers according to the best interests of students. This kind of arrangement is standard in the private sector, where continuous quality improvement is both expected and delivered.

Ultimately, reform of teacher compensation will be most successful in school systems free of the regulatory burdens imposed by union contracts and the education bureaucracy.