1 / 0

Market-Based Compensation Reform in K-12 Education

Market-Based Compensation Reform in K-12 Education. Education Leadership Conference Southern Methodist University Nov. 4, 2011 Michael Podgursky Department of Economics University of Missouri – Columbia Fellow, GWBI / SMU PodgurskyM@missouri.edu.

morrison
Download Presentation

Market-Based Compensation Reform in K-12 Education

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Market-Based Compensation Reform in K-12 Education

    Education Leadership Conference Southern Methodist University Nov. 4, 2011 Michael Podgursky Department of Economics University of Missouri – Columbia Fellow, GWBI / SMU PodgurskyM@missouri.edu
  2. 2007-08 Public K-12 $ 304b salaries, $103b benefits 90% of instructional spending “… human resources are key to organizational success or failure. It is perhaps going too far to say that excellent HR policies are sufficient for success. But success with poor HR policies is probably impossible, and the effects of improved HR success are potentially enormous.” (Baron and Kreps, 1999, emphasis in original).
  3. Overview Are current teacher compensation policies the most efficient way to recruit, retain, and motivate high quality professionals for public schools? Quantity versus quality (staffing ratios) Rigid pay structures (single salary schedule) Retirement benefit systems
  4. Teacher Quality/CompensationQuantity-Quality Tradeoff
  5. Student Enrollment, Teacher and Non-Teacher Employment In Public Schools: 1980 - 2007 Annual average real spending per student growth = 2.3% $53,537 $43,722 $79,128 5
  6. Staff to Student Ratios: US Public Schools, Fall 2007 Source: NCES. Digest of Education Statistics. 2009
  7. Falling Student-Teacher RatiosU.S., Missouri and Texas, 1991-2005 NCES. Digest of Education Statistics, various years
  8. The Structure of Current Compensation Single Salary Schedule Rigid by Teaching field Schools within a district Teaching effectiveness “You Can’t Repeal the Law of Supply and Demand”
  9. Columbia, MO teachers
  10. Monthly Salary Based on the Standard 10-Month Contract.  Texas http://www.tea.state.tx.us/index2.aspx?id=2147485382
  11. Weak relationship between experience and teacher effectiveness (first few years only) No relationship between teacher MA and effectiveness

  12. Rigidities by Field

  13. Could Not Fill Very Difficult Somewhat Difficult Easy Source: NCES. Schools and Staffing Surveys, various years
  14. Recruitment Difficulties by School Poverty, 2003-04
  15. The Structure of Current Compensation Single Salary Schedule Rigid by Teaching field Schools within a district Exposure to novice teachers within district positively related to student poverty (Podgursky, 2007) Teaching effectiveness Wide variation in teacher effectiveness within districts and schools
  16. Percent Student Poverty and Percent Novice Teachers: Elementary Schools in Nine Largest Missouri School Districts, 2005-06
  17. The Structure of Current Compensation Single Salary Schedule Rigid by Teaching field Schools within a district Exposure to novice teachers within district and student poverty Teaching effectiveness Wide variation in teacher effectiveness within districts and schools Aaronson, Daniel., Lisa Barrow, and William Sander. (2007) Teachers and Student Achievement in the Chicago Public High Schools. Journal of Labor Economics 25 (1), 95-135.
  18. By Teacher Quality…

  19. Total Compensation = Current + Deferred Compensation

  20. Labor Market Effects of Teacher Pensions(Final Average Salary DB pensions) Backloading of benefits “Pull” (to an arbitrary age) and “Push” educators out of the workforce at relatively young ages Massive penalties for mobility (22,000 miles of pension borders) Distortion in market for administrators
  21. (non) Sustainability R. Novy-Marx and J. Rauh. 2009. “Liability and Risks of State-Sponsored Pension Plans.” Journal of Economic Perspectives. 23 (4), 191-210 Government Accounting Standards Board. 2010. GASB Expresses Preliminary Views on How to Improve Its Pension Standards. (June)
  22. Typical DB teacher pension Annual Pension = S x FAS x r(S,A) S = service years FAS = final average salary r(S,A) = replacement factor Age and /or service criteria for regular retirement
  23. Lots of moving parts … Table 1: Key Features of Selected State Defined Benefit Teacher Pension Plans s Note: YOS = "Years of Service." Sources: NASRA (2008), individual state CAFR's and pension handbooks. 1 Includes 1% for retiree health insurance. 2 Contributory members only. Average is 4.80%, including non-contributory. 3 Includes 2.5% for 80% floor on initial purchasing power (see COLA). 4 Includes 2% for a supplemental defined contribution plan (see CALSTRS Member Handbook, 2007-08). 5 Calculated from FY07 state appropriation (Commonwealth Actuarial Valuation Report, January 1, 2007). 6 For all teachers hired since 2000.7 Includes 1.4% for retiree health insurance8 Includes 0.5% for retiree health insurance
  24. In order to understand incentive effects need to understand accrual (accumulation) of pension wealth
  25. Pension wealth: Present Value of Stream of Future Benefits “cash value” of pension stream Market for annuities PW takes account of size of annuity and expected number of years it is collected Note: aggregate PW for educators = total liabilities of plan IRA Annuity
  26. Costrell and Podgursky(2011)
  27. Missouri pull push out Costrell and Podgursky (2008)
  28. Arkansas Annual Accrual of Pension Wealth as a Percent of Salary Source: Costrell and Podgursky (2007)
  29. California Source: Costrell and Podgursky (2007)
  30. Massachusetts Source: Costrell and Podgursky (2007)
  31. Ohio Source: Costrell and Podgursky (2007)
  32. Texas Source: Costrell and Podgursky (2007)
  33. Deferred income as percent of salary, Ohio: Entry ages 22, 25, 30 Net Addition to Pension Wealth from an Additional Year of Teaching 400% 350% 300% 250% 30 25 200% 22 150% 100% percent of salary 50% 0% 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 - 50% - 100% age at separation (Addition to pension wealth is net of interest on prior wealth and net of employee contribution. Assumptions: see Figure 1. ) Ohio
  34. Do these spikes affect teacher retirement decisions? Yes Furgeson, Strauss, Vogt (2006) - PA Brown (2008) - CA Ni and Podgursky (2011) – MO Costrell and McGee (2010)- AR Mobility Decisions? Yes Koedel, Grissom, Ni, Podgursky (2011)
  35. Teacher Retirements by Years of Teaching Experience: 1993 and 2008 Retirees (Missouri) Source: Ni, Podgursky, and Ehlert (2009)
  36. Effects on Teacher Turnover Source: Ni, Podgursky, Ehlert, 2009
  37. Experience and Age of Teacher Retirees: 1993, 2002, and 2007 (Missouri ) Trend toward later retirement in other sectors and other industrial nations: Gendell ( 2008) Burtless, (2008) Source: Ni, Podgursky, Ehlert, 2009
  38. Penalties for Mobility Female Teacher Enters at 25 Continuous Work Salary Schedule of State Capitol Other assumptions, see Costrell & Podgursky (2009)
  39. Actual PW accrual (30) Cash Balance, smooth accrual Actual PW accrual (15-15) Source: Costrell and Podgursky (2009)
  40. 30 15-15 Source: Costrell and Podgursky (2009)
  41. Source: Costrell and Podgursky (2009)
  42. Costrell and Podgursky (2010)
  43. Projections of Public School K-12 Enrollment: 2005 to 2017 Source: U.S. Department of Education. National Center for Education Statistics. http://www.nces.ed.gov/programs/projections/projections2017/sec1c.asp
  44. Effects on Markets for School Leaders Source: Koedel, Grissom, Ni, Podgursky (2011)
  45. 22,000+ miles of pension borders
  46. Conclusions HR Training for School Leaders Compensation Design Evaluation Greater Labor Market Transparency Interstate teacher/administrator mobility Relative pay and compensation “Regulatory space” for HR Experimentation All aspects of compensation Charter schools Evaluation
  47. Selected References M.Podgursky. “Teacher Compensation and Collective Bargaining.” in R. Hanushek, S. Machin, and L. Woessman (eds). Handbook of the Economics of Education . Vol. 3. http://web.missouri.edu/~podgurskym/Econ_4345/syl_articles/Podgursky_Teacher_comp_EoE_final.pdf R. Costrell and M. Podgursky. 2009. “Peaks, Cliffs, and Valleys: The Peculiar Incentives of Teacher Retirement Systems and their Consequences for School Staffing.” Education Finance and Policy. http://web.missouri.edu/~podgurskym/articles/files/costrell_podgursky_EFP_2009.pdf R. Costrell and M. Podgursky 2010 "Golden Handcuffs" Education Next  10 (1) (Winter), 60-66 http://educationnext.org/files/ednext_20101_60.pdf C.Koedel, J. Grissom, S. Ni, M. Podgursky 2011. “Pension-Induced Rigidities in the Labor Market for New Teachers.” http://economics.missouri.edu/working-papers/2011/WP1115_koedel_podgursky_ni.pdf A. Olberg and M. Podgursky. 2011. Charting a New Course to Retirement: How Charter Schools Handle Teacher Pensions. Washington DC: Fordham Institute. http://web.missouri.edu/%7Epodgurskym/articles/files/Charter_School_Pensions_FINAL.pdf
More Related