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The Cost and Payoff of Great Teaching

Written by Featured Organization on 15 November 2010.

Profit of EducationYou want more great teachers, the kind that demonstrably raise student achievement, the kind students remember years after finishing school?

According to a new book by Dick Startz, Castor Professor of Economics at the University of Washington, it will cost about $90 billion a year. But Startz says the return on investment would be $800 billion to $900 billion annually -- and that doesn’t count civic advantages.

Startz has written “Profit of Education” (Praeger Publishers, $44.95), which says American students are losing ground to students in other countries because the most talented are not becoming teachers -- instead, they are going where their work gets rewarded financially.

The book, which combines readable prose with quantitative data, is getting attention. “What ‘Freakonomics’ did in raising our collective economic literacy, this book does for the economics of schooling,” said Kate Walsh, president of the National Council on Teacher Quality.

The son of a school board president and a school psychologist, Startz lays out a possible solution to the problem of teacher salaries:

If between kindergarten and high school graduation, a student is consistently taught by above-average teachers, that student would acquire what amounts to an extra year of education.

According to economists’ calculations, each additional year of schooling raises lifetime earnings an average of 10 percent. So if students received the equivalent of an extra year of school, it would enhance gross domestic product by about $900 billion annually.

Think of it this way, Startz says: “Taxes from the increase in productivity will not only pay for the program, in the long run, they’ll pay about half the national debt.”

Startz points to multiple studies of student achievement showing that teachers are the key variable in student performance. Startz figures if average teachers, those in the 50th percentile, could be moved to above average, the 70th percentile, student achievement would rise by the equivalent of an extra year of schooling.

He makes clear, however, that additional quality requires financial incentives that significantly change teachers’ income. Offering enough incentives that the average teacher’s salary increases by 40 percent would cost about $90 billion annually, according to Startz’s calculation. It’s somewhat less than the Obama stimulus package devotes to education and two-thirds the annual cost of the wars in Iraq and Afghanistan.

Startz arrives at 40 percent several different ways. One is that a 40 percent raise would move the average teacher from earning at the 37th percentile of the college-educated work force to the 57th percentile -- a bit above average, which is commensurate with results expected of good teachers.

Teachers need a 31 percent raise, Startz says, to simply catch up with people who have similar academic training, experience and job complexity. In the last 50 to 60 years, teaching has lost salary ground compared with similar professions, and Startz shows that this drop hurts in recruiting the most able college graduates.

“In any business, over the long haul,” he says, “you get a great team by paying appropriate salaries, and then rewarding people financially for being really good at their work.”

Also, Startz says, “Teacher evaluation makes sense only when linked to meaningful financial rewards,” but most performance-based compensation programs haven’t really delivered. The more important thing, he believes, is to pay well enough to draw above-average brains to the profession and then offer bonuses for exceptional performance.

Figuring out what above-average and stellar teachers do makes a lot of sense, he says, especially if those behaviors could be communicated to lesser-achieving colleagues. Startz says incentives could be offered groups of teachers within a school, such that they’d have reasons to help colleagues and weed out those who don’t perform. To encourage this, Startz proposes that a portion of future salary increases be tied to group achievement.

With the efficiency of an economist, Startz includes a checklist for a differential pay system and talking points for conversations with government representatives, school district administrators and nonprofits interested in education reform.

For more information, go to the Profit of Education blog.

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