Teachers Paid More Than Market Value

Little wonder the teachers want to maintain the status quo when it comes to job protection. Wisconsin governor made good on a campaign promise to keep as many teachers and other public employees if he is elected by enforcing a new budget that has the teachers paying something toward their health care and pensions instead of paying nothing. This alone saved the state millions and more than 5000 teachers jobs.

The catch here is that the teachers, and their union, would have to give up their collective bargaining option for health care and pensions. They would be able to retain the collective bargaining on wages. The results are dynamic as most school district saw millions in savings and most teachers retain their jobs. And as an added bonus, the teachers saw their checks go up by at least a $1000 by not have to pay union dues.

Who Knew? Just recently the union didn't even seek to be re-certified in the state as the members found little reason to join under the new contract. hmmmmm

Assessing the Compensation of Public School Teachers
Heritage Foundation

As state lawmakers trim budgets to bring expenditures in line with dwindling revenues, many are looking to the area of education as a potential source of deficit reduction. Groups including teachers' unions oppose this move, recognizing that state cuts and reforms will probably include personnel loss. They further this argument by pointing out that teachers already make little as it is -- how can congressmen consider reducing it even further?

However, this argument is based on a false premise, as public school teachers actually receive a salary that is greater than their real market value, say Jason Richwine, a senior policy analyst at the Heritage Foundation, and Andrew Biggs, a resident scholar at the American Enterprise Institute.

Measurements of teacher income in the past have relied upon poor methods of calculation. Standard analytical approaches compared teacher salaries to the salaries of similarly educated and experienced private-sector workers, and then added the value of employer contributions toward fringe benefits. In order to correct this equation, which understates the benefits that teachers receive, two changes need to be made: first, teachers should be compared with professionals of similar cognitive skill, as simply equating education levels does not take into account the low amount of skill necessary to be a teacher; and second, teachers' most generous benefits, such as pension programs, must be incorporated into this figure to maintain its accuracy.

Upon implementing these two changes, one of the first conclusions that can be seen is that the wage gap between teachers and non-teachers disappears when the two groups are compared by cognitive skills. Several other findings are also crucial to the final conclusion that not only do public school teachers receive a market wage, but their salary-benefits package is actually substantially greater.

Workers who switch from non-teaching jobs to teaching jobs receive a wage increase of roughly 9 percent, while teachers who change to non-teaching jobs see their wages decrease by approximately 3 percent.

When retiree health coverage for teachers is included, it is worth roughly an additional 10 percent of wages, whereas private sector employees often do not receive this benefit at all.
Teachers benefit strongly from job security benefits, which are worth about an extra 1 percent of wages, rising to 8.6 percent when considering that extra job security protects a premium paid in terms of salaries and benefits.

Taking all of this into account, teachers actually receive salary and benefits that are 52 percent greater than fair market levels.
Source: Jason Richwine and Andrew Biggs, "Assessing the Compensation of Public-School Teachers," Heritage Foundation, November 1, 2011.