Merit Pay is Free Market Dynamics

Does merit pay work? Of course it does, and why not if it works in industry, why not in schools. After all, teachers are human and have the same wants and desires as the people that have other occupations.

Call it the carrot and stick phenomenon or what ever you want, but in the end, it isn't lost on the teachers that if they produce positive results, they get more money. If they don't, they get fired! It's the free market at it's best. A product that works sells every time.

Does Merit Pay Work?
Source: Sarena Goodman and Lesley Turner, "Does Whole-School Performance Pay Improve Student Learning?" Education Next, Spring 2011.

Recently, the New York City Department of Education (DOE) conducted a policy experiment to test whether giving merit pay to all teachers at an effective school could increase student achievement. The city's School-Wide Performance Bonus Program, launched in 2007 and endorsed by both the DOE and the teachers union, was implemented in a randomly selected subset of the city's most disadvantaged schools.

The analysis presented by Sarena Goodman and Lesley Turner, Ph.D. candidates in Columbia University's Department of Economics, is based on data from the first two years of the bonus program.

The effectiveness of school-wide bonus programs may depend on the number of teachers with tested students in a school. For schools in the bottom quartile of the number of teachers with tested students, that is, schools with approximately 10 or fewer such teachers in elementary and K-8 schools and five or fewer in middle schools, school-wide merit pay did lead to improved student achievement.

Goodman and Turner estimate that the New York City bonus program had a positive effect on student math achievement in these schools in both program years, although the estimated effect in the second year fell just short of conventional levels of statistical significance.

Conversely, this analysis also indicates that the program may have slightly lowered student achievement in schools with larger teaching staffs.

Math achievement gains attributable to the bonus program in schools with smaller teaching staffs were modest in size but meaningful.

For merit pay to improve student outcomes, teachers must face strong incentives to improve their performance.

Goodman and Turner's study indicates that school-wide bonus programs may be able to provide those incentives in schools with relatively small teaching staffs. They may also be appropriate for schools characterized by a high degree of staff cohesion, in which teachers work collaboratively to improve student learning and it is difficult to isolate the performance of a single teacher.