Wages and The Composition of the Teaching Body: Evidence from Wisconsin

Barbara Biasi

Salaries of teachers in the US are often determined by a teacher’s academic qualification and years of seniority and are negotiated between teacher unions and school districts. The lack of a link between performance and compensation is regarded as one of the issues behind the challenges faced by many public school districts when attracting and retaining high- quality teachers. This paper exploits a recent reform of teacher pay in Wisconsin, which prohibited collective bargaining over salary schedules, to study the effects of performance pay on the composition of the teaching body. Evidence based on teacher-level data shows that teachers respond to salary changes by moving across districts or by leaving public schools. In particular, high-quality teachers move to districts with a high merit pay component of salaries, and low-quality teachers leave these districts. To quantify these responses I build and estimate a model of the teacher labor market, where districts make job offers and teachers accept or decline them, under two possible pay regimes: a salary-schedule regime and a performance-pay regime. Estimates from the model indicate that teacher responses depend on quality. The model is then used to analyze counterfactual policies on teacher salaries. I show that an increase in merit pay in one district is associated with an inflow of high-quality teachers and an outflow of low-quality teachers, which leads to an improvement in the overall quality of the workforce.

About Barbara Biasi

Barbara Biasi is a PhD Candidate in Economics at Stanford University, conducting research on education reforms aimed at promoting equality of opportunities to all children. In particular, Barbara has studied the effects of school finance equalization reforms on intergenerational income mobility of students, and she is now studying how changes in teacher salaries affect the composition of the teaching workforce. Prior to starting her doctoral studies, she worked as a Research Assistant at IGIER (Università Bocconi) and at the Fondazione Rodolfo Debenedetti in Milan, collaborating to research projects in Labor and Public Economics. Barbara holds a B.Sc. in Business Administration and a M.Sc. in Economic and Social Sciences from Università Bocconi (Milan), and she spent one semester at New York University – Leonard Stern School of Business as an undergraduate.