John Hood: There's a better way to pay teachers

Even after adjusting for living costs, for example, the average first-year teacher makes nearly $1,000 more in Georgia than in North Carolina, $2,000 more in South Carolina, $2,500 more in Florida, and $8,000 (!) more in Texas.

Now, the pay differences aren’t as pronounced at other levels of teacher experience. Nor are North Carolina public schools primarily vying with districts in other states for talent. What these data really tell us is that school districts in other states are competing more aggressively for folks who might otherwise choose to work in other education jobs — inside or outside their home states — or pursue other careers entirely.

Teacher compensation is, obviously, a fiscal question. The General Assembly has enacted raises in recent years and needs to do more. But it isn’t only a fiscal question. As the education-reform group BEST NC put it in a recent report, the problem “is not just about how much teachers are paid, but also how that pay is structured.”

I’ve already spotlighted one flaw in North Carolina’s approach: We set starting salaries comparatively low and then gradually raise them through annual steps. As a result, we’re making early-career teachers wait too long to get a reasonable level of compensation. We ought to flatten the pay curve more than we already have.

By no means, however, do I mean to suggest that mid-career teachers ought to have no paths to meaningful boosts in their compensation. What most academic research on the subject demonstrates, and what the BEST NC report recommends, is that pay in North Carolina ought to be much more differentiated. Those who teach hard-to-staff subjects such as science and advanced math should be paid significantly more than other teachers, as should those who teach in hard-to-staff schools with rates of student disadvantage, those who take on greater responsibilities such as training other teachers, and those whose evaluations show consistently high performance.

An innovative study just released by the National Bureau of Economic Research confirms many of these insights. Andrew Johnson, an economist at the University of California-Merced, presented a series of compensation offers to teachers in a large school district in Texas. The offers varied in salary, benefits, and working conditions. By receiving and assessing teacher responses, the study allowed Johnson to estimate dollar values for alternative approaches.

One finding particularly stood out to me: While the participating teachers did, all other things being equal, prefer to teach smaller classes instead of larger ones, the preference wasn’t all that strong. “The cost of reducing class size is seven times greater than teachers’ willingness-to-pay,” Johnson wrote. Similarly, the average value teachers placed on teacher assistance was less than the cost of hiring a teacher assistant at minimum wage. On the other hand, the respondents placed a high value on working for a “supportive” principal who backs them up when disciplining unruly students.

As for nonwage benefits, the study found the value teachers put on a traditional defined-benefit pension was lower than its cost. Respondents showed a greater preference for a defined-contribution approach, perhaps because they saw it as more consistent with future changes in jobs or careers. As it happens, the BEST NC model recommends that North Carolina offer our teachers more options that “provide higher take-home pay in exchange for lesser retirement contributions.”

Finally, the study found that teachers valued performance-based pay, although they tended to prefer a blended model rather than one focused solely on value-added test scores. Based on these findings, school districts often “underutilize salary and performance pay while overutilizing retirement benefits” when competing for teachers, Johnson concluded. “Restructuring compensation can significantly improve both teacher welfare and student achievement.”

That’s precisely the course North Carolina policymakers should pursue in 2025 and beyond.