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School human capital and teacher salary policies

Eric A. Hanushek
Published Date: 
Journal of Professional Capital and Community
pp. 23-40

Purpose – The purpose of this paper is to consider how the level and structure of teacher salaries
affect student outcomes and the possibility of improving student achievement in the USA.

Design/methodology/approach – The analysis integrates an underlying economic model of the role
of salaries in the teacher labor market with existing empirical results.

Findings – Much of the current policy discussion about teacher salaries is very unclear about how
student outcomes will be affected by changing policies. The US is at a “bad equilibrium” where it
cannot increase salaries for effective teachers without increasing salaries for ineffective teachers and
thus it is stuck with a teaching corps that is harming both students and the future economic
performance of the country. Dealing with problems of the productivity of schools must involve altering
the structure of the single salary schedule for teachers.

Research limitations/implications – The discussion focusses exclusively on the US schooling
system, although there are obvious parallels to systems in other countries.

Practical implications – The paper provides an overarching model of how the structure of salaries
for teachers has broad implications of school outcomes.

Social implications – Improved long-run economic outcomes depend crucially on reforms that
involve rewarding the most effective teachers but not the least effective.

Originality/value – The integrated approach to the consideration of teacher salaries provides a way
of assessing the discordant policy discussions related to teacher salaries.

Keywords Human capital, Economic outcomes, Merit pay, Teacher evaluations, Teacher salaries

Paper type General review