By: Jessica Baker, Michael Berner, Cheryl Cresci, and Dina Vigliotta

 Merit pay and pay for performance are often used interchangeably. They are labels applied to pay systems that include a range of components—there is no single definition. The pay systems usually include evaluation as one component, and, today, there is growing pressure to include standardized test scores as a measure of teacher performance. (NEA, 2011)  Merit pay for teachers is a system of compensation in which teachers who are “better” at their jobs (meaning they are more effective) are rewarded with higher compensation, although other forms of differentiated pay often are included. There are two basic systems: (1) those that reward teachers for what they do, and (2) those which reward teachers for what their students do. Many performance pay systems combine both these elements. (NEA, 2011)

The Issue: “Most public school teachers are paid today under a system that is close to 90 years old and involves allowing teachers to earn salary increases through experience and additional coursework. There is a ‘pay for performance’ movement that would allow teacher salaries to be linked to how well a teacher does his/her job--especially by how well their students do on standardized tests and on their evaluations.” - Valerie Strauss, The Washington Post

 Contractual salary schedules for teachers are a nearly universal feature of American K–12 public school districts.  Data from national surveys show that close to 100 percent of traditional public school teachers are employed in school districts that make use of contractual salary schedules in pay setting (Podgursky, 2007).  Thus, roughly 3.1 million public school teachers from kindergarten through secondary level are paid largely on the basis of years of experience and education level. These two variables, researchers suggest, are “weakly correlated, at best, with student outcomes” (Hanushek, 2003).

 The single salary schedule contrasts with pay determination practices in the majority of white collar professions, where performance-related pay programs are commonplace.  Most private sector employees are given two types of pay: 1. Base pay- represents a foundation or floor on pay, which is guaranteed (or at low risk) and typically paid as a salary, hourly, or piece rate wage. 2. Variable pay- is riskier and is associated with the bonus or performance pay system. Variable pay is compensation that is contingent on discretion, performance, or results that comes in the form of an individual bonus, a group bonus, or some combination of the two.

 Merit-based pay programs date back to Great Britain in the early 1700s!  Similar ideas formed around the notion of performance contracting in the late 1960s (Stucker & Hall, 1971) In the late 1960s, President Nixon introduced “performance contracting,” which offered incentives to private firms to improve student achievement. By the early 1970s, over 150 school districts contracted with companies to deliver instruction, as the Nixon Administration initiated a vast privatization experiment in Texas and Arkansas. None of these performance contracting experiments significantly improved instruction. After charges of corruption, teaching to the test, and a lack of results, the program was abandoned and the single salary schedule continued to dominate school districts throughout the U.S. (NEA, 2011)

 It was not until the release of the A Nation at Risk report in 1983 that a significant number of public school districts in the United States began considering merit-based pay as an alternative or supplement to the single salary schedule. A Nation at Risk, a Reagan Era critique that blamed the nation’s economic downturn on poor schooling, recommended increased pay for teachers and pay for performance as two strategies to improve the nation’s system of education. (NEA, 2011) “Professionally competitive, market-sensitive, and performance- based” (A Nation At Risk: Recommendations, 1983). One goal of this recommendation was to tie compensation more directly to classroom skill. Merit pay has been used as an attempt to rectify the failings of the single-salary pay schedule, including the frustration that all teachers with the same educational level and experience are paid equally, despite potentially unequal performance and skills.

 Today, pay for performance or merit pay is a national trend, pushed by the federal government which, in 2008, established funds for incentives, including the use of test scores. Cities from Minneapolis to Denver, Toledo, Chicago, New York and San Antonio adopted performance pay systems. By 2008, Alaska, Arizona, Arkansas, Florida, Minnesota, North Carolina and Texas had systems that base teacher pay in part on performance. Other states are currently considering such legislation.  Merit-based pay rewards individual teachers, groups of teachers, or schools on any number of factors, including student performance, classroom observations, and teacher portfolios.  Merit-based pay is a reward system that hinges on student outcomes attributed to a particular teacher or group of teachers rather than on “inputs” such as skills or knowledge—a critical distinction that is emphasized later in this review. (NEA, 2011)

Prior Teachers St udent Mobility Family life

 Middle school math teachers were offered bonuses if students performed well on state test. Control group comparison  Over the course of the three year study, “students did not progress any faster in classrooms where teachers were offered bonuses.” Source:

 Elementary school teachers were offered bonuses if students performed well on state test. Administrators and other teachers were also rewarded if the school improved overall. Control group comparison  After two years students achieved “average gains of approximately seven percentile points” and the control schools showed a decline in scores. Source:

 TAP (The System for Teacher and Student Advancement) is a well-funded nationwide program.  Offers performance-pay incentives, but also has intensive professional development, 4-6 observations a year, opportunities for career advancement, ongoing support and mentoring for teachers and students, and so on.  Let’s take a look at their results….do you notice anything interesting (math teachers)?

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 It is difficult to evaluate due to numerous outside factors.  Most research is based on a single test score result.  Cannot directly prove if student achievement increases because of merit pay alone.  Difficult to compare studies due to different populations, resources, etc.

Research shows that the presence of a high-quality teacher improves student performance. Performance pay decreases intrinsic motivation of teachers.

 Depends on funding source.  Requires short and long term financial planning. Costs need to be identified, projected, and a plan for maintaining the funds needs to be laid out.  Lots of anticipation! Change in teaching force. Change in the number of students. Supplemental resources. Other funding sources.

 EXPENSIVE!  Who is receiving merit pay? Math/ELA v. All teachers v. All staff  How much does each teacher or administrator get? Scale Percent  How long?

 Schools have several different ways of funding merit pay. Grants Private Corporations District (community) State Federal – Teacher Incentive Plan  Delaware