Do Higher Salaries Yield Better Teachers and Better Student Outcomes?

More experienced and better qualified teachers are less likely to teach in schools that serve children from relatively poor families. This could have important consequences for student outcomes. To attract more experienced teachers, schools in disadvantaged neighborhoods might consider offering higher salaries. José María Cabrera (Universidad de Montevideo, Uruguay) and Dinand Webbink (Erasmus School of Economics, Rotterdam, Tinbergen Institute, IZA) asked: What is the impact of higher salaries on teachers and students?

Cabrera and Webbink studied the effect of an unconditional pay increase within a labor market that favors teachers that are more experienced. In Uruguay, teachers can earn higher salaries by working in poor schools. The government ranks every public school according to a poverty index, and schools above a cutoff were assigned to the extra resources program. The researchers compared schools just above and just below that cutoff, so they are comparable in every dimension, but only at one side of the cutoff teachers receive a salary increase.

They found large effects on the teaching staff in the targeted schools. The school choice of teachers is sensitive to variation in teacher pay. During 2009–2013 the policy increased the experience of the teaching staff by two to three years on average. Experienced teachers came from schools in better neighborhoods that didn’t have a salary increase. The extra salary also reduced teacher turnover.

Did students benefit as well? Despite these large changes in the composition of the teaching staff, the impact of higher teacher’ wages on student performance was small. Across a range of test-score outcomes and non-test-score outcomes, such as grade retention and dropout, the team failed to detect a consistent positive impact of the extra salary program.

Cabrera and Webbink explain this result by showing that the program may have increased experience in ways that are not strongly associated with improved student outcomes. So, it appears there is more work to be done to unlock solutions. According to the authors, “Increases in teacher pay may only improve student outcomes if it increases those teacher characteristics that actually improve student outcomes. Consistent with this, we do find achievement gains for students in schools that saw a reduction in the share of very inexperienced teachers.”

Read the full study in the Journal of Human Resources: “Do Higher Salaries Yield Better Teachers and Better Student Outcomes?” by José María Cabrera and Dinand Webbink.

José María Cabrera is at Universidad de Montevideo, Uruguay. Dinand Webbink is at Erasmus School of Economics, Rotterdam, Tinbergen Institute, IZA.