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Posted at 12:30 PM ET, 02/01/2012

Does merit pay really increase teacher retention?

This was written by Eleanor Fulbeck, who has a doctorate in education policy from the University of Colorado at Boulder and is currently a post-doctoral fellow at the University of Pennsylvania. Here she explains that the evidence on whether merit pay increases teacher retention is less than clear — despite recent articles in the media suggesting otherwise. A version of this post originally appeared on the blog of the Albert Shanker Institute in Washington, D.C.

By Eleanor Fulbeck

A month ago an article in The New York Times looked at the new incentive program being used by the District of Columbia Public Schools. Under this plan (called “Impact Plus”), teachers rated “highly effective” by the district’s new evaluation system are eligible for large cash bonuses and/or permanent salary increases.

The article said, “The profession is notorious for losing thousands of its brightest young teachers within a few years, which many experts attribute to low starting salaries and a traditional step-raise structure that rewards years of service and academic degrees rather than success in the classroom.” It also profiles several teachers who received the bonuses, most of whom say it played a role in their decision to remain in the classroom.

Putting aside these anecdotes and characterizations of “experts’” views, the idea that financial incentives — such as bonuses for performance or teaching in hard-to-staff schools — is a key to boosting teacher retention is a complex empirical question, and an open one at that.

While some turnover is expected and may even be beneficial, extensive teacher mobility — the rate at which teachers leave the profession and/or switch schools and districts — can undermine policy efforts to develop a high-quality workforce. Although there are many reasons behind teacher turnover, prior research suggests it may be due — at least in part — to dissatisfaction with low salaries (Ingersoll 2001). Thus, increases in compensation may increase job satisfaction and improve teacher retention.

Several studies offer evidence supporting this view (Imazeki, 2005; Ingersoll, 2001; Kirby et al., 1999; Lankford, Loeb & Wyckoff, 2002; Podgursky, Monroe & Watson, 2004). For example, Kirby found that a $1,000 increase in salary was associated with reduced attrition by approximately 3 percent overall and 6 percent among Latino and African American teachers in Texas. Similarly, Ingersoll found compensation for advanced teachers (those with a master’s degree and 20 years or more of experience) also had a small but significant positive impact on teacher retention. After controlling for teacher characteristics, he found that a $1,000 difference in compensation was associated with a decrease of 3 percent in the odds of voluntary teacher departure.

Based on this evidence — that teachers who earn more are more likely to stay — proponents of alternative teacher compensation programs argue that financial incentives will yield improved teacher retention.

Yet there is reason to question this assumption, since there are many differences between uniform salary increases and the potential to earn additional pay through financial incentives.

Unlike uniform salary increases, financial incentives are:

* based on an economic model that assumes teachers make career decisions in response to money;

* not guaranteed from one year to the next, unless they are awarded as permanent raises, and thus may not appeal to teachers if they are risk-adverse;

* potentially insulting to teachers (particularly incentives that are performance-based) because they can be taken to imply that teachers are withholding improvements to student learning and performance for higher pay;

* possibly ineffective (particularly those that are performance-based) if teachers don’t know what more they can do to increase student performance or meet other outcomes to which incentives are attached;

* and bound to raise delicate questions of fairness between teachers and of trust between teachers and districts.

Given these substantial differences, it is not clear that increased compensation via financial incentives will yield improved teacher retention, or at least not in the more straightforward way in which higher salaries proper are associated with improved retention.

Washington D.C.’s alternative teacher compensation program, which was profiled in the aforementioned New York Times article, has not yet been evaluated to determine the program’s effects on retention, student performance, or other outcomes of interest. There is, however, some evidence from other programs, which we might review in order to better understand the potential effects of financial incentives on whether teachers stay.

Mathematica’s most recent evaluation of Chicago’s Teacher Advancement Program, which includes data from two years, found no difference in teacher retention at the district- or school-level as a result of the program.

Stanford University’s Policy Analysis for California Education and the Center for Education Policy Analysis recently released their evaluation of first-year outcomes from the San Francisco Quality Teacher and Education Act , which is an incentive program. They found that the majority of teachers reported that the education act did not affect their decision to stay in their current school.

There are also a few evaluations of alternative teacher compensation programs in Texas, all projects of researchers affiliated with the National Center on Performance Incentives. These include: 1) an evaluation of the District Awards for Teacher Excellence Program third-year outcomes; 2) an evaluation of the Texas Educator Excellence Grant second-year outcomes; and 3) an evaluation of the Governor’s Educator Excellence Grant one-year outcomes, which did not examine retention outcomes associated with the grant program.

The results of these evaluations have been mixed.

The programs allow Texas districts and schools to set their own incentive award amounts. Perhaps not surprisingly, NCPI researchers found that there were retention gains among teachers who received large bonuses. However, they also found sharp decreases in retention associated with smaller incentives and for teachers who did not receive an incentive.

The implication of these findings is troubling: Not only is it possible that financial incentives do not affect teacher retention, but they may actually exacerbate turnover if the incentives are small or if teachers do not receive an incentive under these programs. Taken together, National Center on Performance Incentives (NCPI) researchers find little evidence that districts and schools in the District Awards for Teacher Excellence Program and/or Texas Educator Excellence Grant programs experienced any systematic change in overall teacher retention.

In 2010, NCPI also released their evaluation of the high-profile randomized experiment of performance-based incentives in Nashville – the Project on Incentives in Teaching. While findings indicated there were no improvements in student test-score achievement associated with this project, the evaluation did not examine retention outcomes associated with the program.

Finally, my own research and research conducted by external evaluators of Denver’s Professional Compensation System for Teachers (ProComp) suggest small gains in retention (between 2-4%). Interview data support these findings: Although a few teachers indicated they considered ProComp financial incentives when making their career decisions, most said they did not consider the incentives to be important factors in such decisions. Rather, teachers indicated that other non-pecuniary factors, such as the principal and student characteristics, were more important considerations in their career decisions. This has been well documented in the research literature (Boyd et al., 2011; Milanowski et al., 2009).

Thus, the available body of evaluation research on alternative teacher compensation programs does not consistently suggest financial incentives improve teacher retention. In some cases incentives appear to be associated with small increases in retention; in other cases, incentives appear to be associated with decreased retention.

The majority of evaluations, however, either found financial incentives had no effect on teacher retention or did not include an examination of retention at all. Accordingly, there is little reason to assume the availability of financial incentives will result in improved teacher retention. If anything, the research to date suggests that other considerations, such as working conditions and leadership, are more important factors in teachers’ decisions to stay, move, or leave the profession entirely.

Future evaluations of alternative teacher compensation programs should include an explicit examination of retention outcomes in their design. Additionally, there is a great need for qualitative data from teachers (e.g., interviews, focus groups, etc.) to better understand the ways in which teachers consider and prioritize factors that affect their career decisions and the degree to which financial incentives may – or may not – factor into such decisions.

In the meantime, implications that incentives are certain to boost retention, as seemed to be the underlying idea in the New York Times piece about Impact Plus, are little more than speculation.

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