Scott G. Winterton, Deseret News
Midvale Elementary 5th grade teacher Patricia Fenton supervises students working. Monday, Aug. 23, 2010. (Scott G Winterton, Deseret News)

SALT LAKE CITY — The Equity Project, a publicly funded charter school in New York City, operates on a simple assumption: Student success depends on excellent teachers.

"Teachers are the key" says school founder Zeke Vanderhoek in a promotional video for the school, often referred to as TEP. To attract top talent, Vanderhoek has taken a unique approach. TEP teachers are given a starting salary of $125,000 with an opportunity to earn an additional $25,000 in merit pay. TEP wages are impressive considering that first-year teachers in New York City earn about $46,000 and midcareer professionals earn around $64,000. The school has caught the attention of education reformers around the country. Will TEP attract better teachers? And more importantly, will student performance improve because of it?

While it is too early to judge the merits of TEP's approach, the school's methods have reignited a national debate about what teachers are paid. Supporters of increasing teacher pay include U.S. Secretary of Education Arne Duncan and former First Lady Laura Bush. "Higher wages are necessary to attract good teachers. We need to recognize and reward excellence," Duncan said in a recent interview with MSNBC. His philosophy resonates with many Americans: A 2011 Poll Position survey found that 56 percent of Americans believe teachers should be paid more.

But a November 2011 report turned that conventional wisdom on its head. Teachers are actually overpaid, says the report, compiled by Jason Richwine and Andrew Biggs for the Heritage Foundation, a conservative Washington, D.C.-based think tank. Teachers are compensated 52 percent higher than their peers in the private sector, the report found. Given the above-average total compensation public school teachers already receive, Richwine is skeptical that increasing salaries will improve the quality of teaching candidates. "If the current compensation bonus teachers receive has not elevated the quality of our workforce, further cross-the-board increases will have little benefit," he said.

And though the debate over how much teachers should be paid is predictably fierce, there may be reason to believe both positions are correct. "Teachers are both over- and underpaid" said Michael Van Beek, director of education policy for the Michigan-based Mackinac Institute, a non-partisan think tank. Paid too little?

Those who argue teachers are paid too little typically cite a September 2010 McKinsey & Company report titled "Closing the Gap." In the report, the management consulting firm noted a troublesome statistic: "The U.S. … recruits most teachers from the bottom two-thirds of college classes." By contrast, top performing countries like Finland, Singapore and South Korea recruit 100 percent of their teacher corps from the top third of graduating classes. The academic success in these countries suggests that attracting top graduates into careers in teaching could help improve the performance of American students.

But enticing top talent into education can be complicated by the profession's low pay and low prestige compared to other fields that require similar credentials. In 2010 a math major can expect to earn a starting salary of about $50,000 working as an actuary for insurance company, according to the Bureau of Labour Statistics. A starting teacher, by comparison, will earn $32,000. Some states such as Georgia have tried to recruit degree holders with math and science backgrounds by offering them additional pay, between $3,000 and $5,000 per year. But since the extra pay doesn't even begin to make up for the lost wages a math major would earn in the private sector over the course of a year, it hasn't had a huge impact.

Using sophisticated market research techniques, McKinsey associates asked top college graduates how much they would have to earn to be enticed into a career in education. They found that moving the starting teacher salary from $32,000 to $65,000 and making the maximum salary $150,000 would more than quadruple the number of top tier graduates entering the profession each year from 14 to 68 percent.

Paid too much?

Despite the McKinsey study, not everyone is convinced that more money equals better teachers. Heritage Foundation research analysts Jason Richwine and Andrew Biggs compared salaries of public school teachers to non-teachers with similar scores on standardized IQ tests. They found that teachers earn about what their peers with a similar IQ earn in fields like accounting, nursing and technical writing. Richwine suggests that teachers are being compensated at fair market rate.

In 2010 the College Board asked students taking the SAT about their intended college major. Students who stated an intention to study education earned combined math and verbal scores of 967, putting them in the 38th percentile of all test takers. By contrast, students who intended to study engineering had average combined SAT scores of 1,118. Additional research by economist Corey Koedel shows that despite the lowest SAT scores, education majors have the highest GPAs among university undergraduates.

But where teachers really make a killing is in benefits, Richwine argues. Teacher pay maybe be about at the market rate but their "fringe benefits — in particular pensions, retiree health care and vacation time are a lot more generous than the private sector," Richwine said. According to data supplied in the Heritage Foundation report, teachers total compensation is about twice that of the private sector. "We show that the average teacher makes around $55,000 in annual salary, but another $55,000 in benefits," Richwine said. In their report, Richwine and Biggs calculate teachers make 52 percent more than their peers in the free market in terms of total compensation. "This is equivalent to more than $120 billion overcharged to taxpayers each year," they note.

Though Richwine and Biggs say their data is sound, critics argue it makes no sense to compare teachers to other workers based on IQ. Jeffrey Keefe, an associate professor at Rutgers University School of Management and Labor Relations, has been a particularly vocal critic of the study. He argues that the model Richwine and Biggs use is rife with statistical problems which render their conclusions erroneous. "A cognitive ability model that does not account for education level is meaningless, because individuals are employed in jobs that depend on the skills acquired through education. This is why education level, not cognitive ability, is used to calculate human capital," he said. Moreover, he argues, though cognitive ability may be necessary to acquire education, it doesn't account for personal investment. "Cognitive ability may enable education investment ... but it is the education that creates the skills that facilitate professional performance."

Differentiated pay

While the too-much and too-little camps are bitterly divided on policy, some analysts say both sides are right. Among them is Frederick Hess, the director of education policy at the American Enterprise Institute, a conservative think tank headquartered in Washington, D.C. "I'm firmly convinced that today some teachers are underpaid and others are overpaid," he wrote in an op-ed for Education Week, an online education policy magazine.

"In the United States it is common practice for teachers to be paid according to union contracts that compensate strictly on years of service and academic degrees," said Michael Van Beek of the Mackinac Institute. He believes that the single-salary pay scale is problematic because it ignores value signals from the labor market. "You end up with a situation where there is no pay difference between an advanced placement physics teacher and junior high gym teacher, even though one clearly has a skill set that is worth more on the labor market." He cites several Michigan school districts, including Harrison, Farmington and Woodhaven-Brownston where, because of seniority and graduate degrees gym, teachers earned an average of $62,000 while science teachers earned around $49,000 a year.

Someone who can teach AP physics, Van Beek reasons, has lots of other job options. Public schools cannot realistically compete with the private sector for highly qualified experts in physics or math because they cannot offer competitive salaries, he says. "When deciding how much to pay teachers we need to pay attention to the labor market."

But what differentiated pay means is that while some teachers will be compensated at much higher levels, there will be others who receive pay cuts. For example, according to the Bureau of Labor Statistics, the average person with a bachelor of arts in English earns about $30,000 their first year out of school. According to Van Beek, in Michigan the average first-year English teacher earns $32,000. Based on these numbers, he says, a school could pay their English teachers just $30,000 a year and still be competitive in recruiting top graduates.

Though differentiated pay could go a long way to solving some problems, its implementation ultimately requires the participation of the teachers unions. "Ultimately reform of teacher compensation will be most successful in school systems free of the regulatory burdens imposed by union contracts" Richwine said.