The American Enterprise Institute released a paper earlier this week that seeks to prove public school teachers are overcompensated by “52% more than their skills would garner in the private sector.” Traditional estimates of teacher compensation generally compare teacher salaries to the salaries of workers with similar education and experience in the private sector, then adding the value of employer contributions toward fringe benefits—leading to the general conclusion that teachers are underpaid. The authors of the study, Andrew Biggs and Jason Richwine, argue that this type of analysis is incomplete and based on faulty methods.
Their main argument against the traditional analysis of teacher compensation is that formal educational attainment (degrees acquired or years of education completed) “is not a good proxy for the earnings potential of school teachers.” This is because “teacher skills generally lag behind those of other workers with similar ‘paper’ qualifications.”
Their analysis shows that:
1. The wage gap between teachers and other professionals disappears when both groups are matched on cognitive ability (i.e., SAT and GRE scores).
2. People who switch from another career to a teaching career increase their wages by 9%. Teachers who switch to non-teaching jobs generally see their wages decrease by 3%. Therefore, teachers are not underpaid.
Much of the analysis focuses on the “fringe benefits” of public school teachers, such as pension programs, retiree health benefits, and job security. They estimate that retiree health benefits alone adds an additional 10% to the worth of teachers’ wages. Also, job security is estimated to add at least 1% to the value of teachers wages, but can go so far as an 8.6% in value “when considering that extra job security protects a premium paid in terms of salaries and benefits.”
Overall, the authors conclude that public school teacher salaries are comparable to similarly skilled private sector workers, but that the “more generous” fringe benefits make total compensation 52% greater than fair market values, or equal to $120 billion in “overcharges” to taxpayers each year. Therefore, they argue that teacher compensation is fair game for budget cuts, and such cuts would have a minimal effect on teacher recruitment and retention.
To read the full study, please visit http://www.aei.org/paper/100259.
For an alternate viewpoint, see http://www.theteachersalaryproject.org/index.php
