Smart Money 2.0

INTRODUCTION

“Teacher pay is low.”

It has been said hundreds of thousands of times before. The search term “teacher pay is low” produces about 487,000 hits in the most popular search engine. A study from the Georgetown University Center on Education and the Workforce found that, in a breakdown of annual salaries by the 14 main college major groups, “education” ranks at the very bottom.¹ Another study by the same institution analyzes salaries for 137 specific majors. Both within bachelor’s degree holders and graduate degree holders, education majors ranked in the bottom 25% of median annual salaries.²

Like all averages, this ranking masks a vast heterogeneity of teacher pay. While teacher pay can indeed be very low in some districts, such as in Sioux Falls (SD) where typical teachers with a bachelor’s degree make on average about $42,000/year over the course of their 30-year teaching career, some teachers in the District of Columbia can make on average $110,000/year over the same time span.

Sioux Falls teachers do not start at the bottom of the first-year teacher salary spectrum, nor do D.C. teachers start at the top of the beginner teacher salary spectrum. And while starting salaries matter, they only tell a small part of the story. Ending salaries, salary growth rates, timing for reaching certain benchmarks, and overall salary trajectories also matter, and they can make a world of difference.

In a market economy where everything has a cost and labor decides freely where to go, salaries are the quintessential incentive for attracting the right person to the right position. This is as true for the teaching profession as it is for others. To delve deeper into the issue, this study looks at and compares the salary trajectories of teachers in 90 large school districts across the country.

NCTQ collected salary schedules and related compensation materials for the 2018-2019 school year from nearly 120 districts in our Teacher Contract Database in order to analyze the lifetime earnings trajectory of teachers over a 30-year career. After the analysis was completed, the decision was made to include only 90 districts in this study, based on the varying nature of salary structures across districts.³ For more detailed information on the methodology used for this analysis, including the list of participating districts, please refer to the methodological appendix.

It is important to note that the monetary benefits of public school teaching doesn’t rest solely on salaries. Public school teachers receive significant monetary rewards toward the end of their teaching careers in the form of benefits such as pensions and health care. A large portion of these benefits are based on length of service and the salaries earned during the last years of a teacher’s career.⁴ Those benefits are not the focus of this study; rather, we focused on the salary trajectory, including the last years of a teacher’s career that are key to the benefits’ calculation.

Do teacher salaries stack up to what comparable professions pay?

The aforementioned study from the Georgetown University Center on Education and the Workforce shows that teacher salaries are often below the salaries of other professionals. Economist Erik Hanushek estimates the overall salary gap for the teacher profession in the United States at 22%.⁵ Some attribute this difference to the fact that the education industry is predominantly female, and it is this occupational gender segregation that transfers the gender wage gap to the teaching profession.⁶ Others raise the idea that teachers are inherently underpaid.⁷ Appendix B: The teacher wage gap explains how teacher salaries—adjusted for regional price parity—compare to the salaries of other professionals in their localities.

Which districts offer their teachers more over the course of their careers?

• The average lifetime earnings of a teacher with a bachelor’s degree in our sample of districts is $1.7 million, or about $57,000/year over a 30-year career. If the teacher earned a master’s degree, her lifetime earnings would increase to about $2 million, roughly the equivalent of earning $67,000/year over the same career span.
• The average lifetime earnings of a teacher in this study—based on 2018-2019 salary schedules—is 15% higher than the one found in the 2014 Smart Money report—based on 2013-2014 salary schedules. That is equivalent to a 3% annual increase, higher than the average inflation rate for that period of 1.55%.
• San Francisco Unified School District (CA) had one of the highest lifetime salary growths between the 2013-2014 and 2018-2019 school years. On average, teachers’ salaries grew by $15,000 or almost 30% in those five years, equivalent to nearly 5% per year.
• On the other hand, the School District of Philadelphia (PA) did not increase its teachers’ salaries between the 2013-2014 and 2018-2019 school years.

Again, a vast heterogeneity of salaries hides behind those averages. The following graph shows the distribution of lifetime earnings for teachers in our district sample who hold a bachelor’s degree. The subsequent graph shows a similar distribution but for teachers with a master’s degree.

• The majority of districts offer their typical teachers with a bachelor’s degree a lifetime salary between $1.6 and $1.8 million, or between $50,000 and $60,000/year.
• Some teachers can earn as little as $1.2 million over 30 years, equivalent to slightly more than $40,000/year on average, such as teachers in Sioux Falls School District (SD) and Albuquerque Public Schools (NM).
• On the other end of the spectrum, a typical teacher with a bachelor’s degree can make as much as $2.4 million throughout her career in Chicago Public Schools (IL), or somewhere in the vicinity of $80,000/year.
• The majority of teachers with a master’s degree in the districts of our sample earn somewhere between $1.6 and $2.1 million over a 30-year career, or between $50,000 and $70,000/year. Again, Chicago stands at the top of the ladder when it comes to average earnings of a teacher with a master’s degree, at approximately $85,000/year over a 30-year career.
• Starting salaries are rarely good predictors of a teacher’s earnings throughout her career

Take, for example, the districts that rank third in the tables below for highest starting salaries and lifetime earnings for teachers with a bachelor’s degree. Fort Worth Independent School District (TX) starts out in the top three for teachers’ starting salaries, whereas Clark County School District (NV) is nowhere to be found in the top half of such ranking. However, when looking at lifetime earnings, Clark County rises to the top three, whereas Fort Worth has sunk to #25 in the lifetime earnings ranking.

The tables below show the district rankings for both starting salaries and lifetime earnings for teachers with a bachelor’s degree and teachers with a master’s degree. There is no direct correspondence between the two variables.

To get an idea of what exactly happens after hiring, and what shapes the trajectory of a teacher’s salary, we asked the following questions:

1. How long does it take a teacher to reach a salary of $75,000 (adjusted for cost of living)?

In the 2014 edition of Smart Money the average maximum salary available to a teacher in that study’s sample was $71,000, adjusted for regional differences in cost of living. The 2014 study analyzed districts’ salary schedules and compared teachers’ salaries against that absolute benchmark to find out how early or late in their careers teachers reach such a benchmark. The study found that, on average, it took teachers 24 years to reach the $71k salary milestone. The current edition of Smart Money follows that line of analysis and adjusts it for the inflation rate between the two samples to roughly reach a $75k salary benchmark.

• We find that, on average, it takes a teacher with a bachelor’s degree about 27 years to reach the $75k salary milestone, while it takes 24 years for teachers with a master’s degree.
• A typical teacher with a bachelor’s degree could reach a $75k salary as early as seven years into her teaching career, as is the case with teachers in Boston Public Schools (MA), or she could never reach that benchmark during her 30-year career, as is the case with teachers in Albuquerque Public Schools (NM).
• In 48 out of 90 districts, teachers with a master’s degree never cross the $75k threshold. Also, in 76 districts of our sample of 90, teachers with a bachelor’s degree never cross said threshold.

• The ability to reach the $75k salary milestone could be accelerated depending on the types of differentiated pay that the districts offer. For example, a high-performing teacher teaching a hard-to-staff subject or in a high-need school in the District of Columbia Public Schools could reach the $75,000 benchmark in just three years.

2. How does salary growth compare across districts? When do teachers top out?

In their 2011 paper on teacher compensation, West & Mykerezi indicated that lifetime earnings are maximized when districts offer a steep salary schedule through which teachers can advance quickly.⁸  This means that the time it takes teachers to reach their maximum salary has a significant impact on their lifetime earnings.

• On average in the districts in our sample it takes a typical teacher with a bachelor’s degree 20 years to reach the maximum salary. However, this time can range from one to more than 30 years (the end of the career span analyzed in this study).

The benefits of the timing for reaching maximum earnings depend on the steepness of the salary curve up to that point. If salaries reach a maximum point too soon, unless preceded by steep salary increases, they will translate into lower lifetime earnings. Similarly, consistent salary increases throughout a teacher’s career won’t necessarily lead to higher lifetime earnings if such increases are too small.

• For example, in Seattle Public Schools (WA), a typical teacher with a bachelor’s degree starts with an above-average salary but reaches the top of the salary schedule after five years. After a 30-year career, the teacher’s real salary (adjusted for inflation) has only increased at an average rate of 0.1% annually, and her lifetime salary is 12% lower than the average.
• Conversely, in New Haven Public Schools (CT), a typical teacher with a bachelor’s degree starts her career with a below-average salary, and reaches the top of the salary schedule after 15 years. After a 30-year career, her real salary has increased at an average rate of 2.3% annually, and her lifetime salary is 17% higher than the average.

In the following graph, select the district or districts, education level, and teacher profile of your choice to visualize and compare teachers’ earning trajectories.

The following graphs show the combination of average annual salary growth and the timing of when teachers’ salaries reach their ceiling. Teachers in districts toward the bottom left of these graphs are among those with the lowest lifetime earnings, because their salaries max out too soon and their average salary growth is lower than average.

• On average, salaries in the districts in our sample grow at a rate of 1.4% annually.
• Twenty-three out of the 90 districts in our sample offer their teachers with a bachelor’s degree an annual salary growth below 1%. In 15 of the 23 districts, teacher salaries grow for less than half of a teacher’s typical career span.
• Only 10 out of the 90 districts in our sample offer their teachers with a bachelor’s degree annual salary growth rates above 2%. Seventeen out of 90 offer these higher salary growth rates to teachers with master’s degrees. In all of these districts, salaries grow for at least 15 years.
• Sioux Falls (SD), Seattle (WA), Santa Ana (CA), Dallas (TX), and Fresno (CA) all offer less than half a percent of annual salary growth to their teachers with a bachelor’s degree throughout their careers. In all of these districts, teachers reach their maximum pay in fewer than 10 years. It is no surprise, then, that these districts stand at the bottom half of the lifetime earnings ranking for teachers with a bachelor’s degree.
• On the other hand, Portland (ME) and Clark County (NV) offer teachers with a bachelor’s degree or a master’s degree over 2.5% of real annual salary growth on average, and these teachers’ salaries grow for over 20 years. Both districts are in the top half of the ranking of lifetime earnings for teachers with a bachelor’s or a master’s degree.

It is, then, the combination of all of these variables working together—starting salary, steepness of growth, the ability to cross a certain threshold, and how many years teachers earn their maximum salary—that determine what a typical teacher ultimately makes throughout her career.

Stories of districts losing or fearing the loss of much needed talent to neighboring districts or states have filled the news over the past year. Because in the U.S. economy human capital is free to move, a district’s ability to attract and retain talent rests not only with its own policies and characteristics, but also with policies and characteristics of surrounding districts. Click here to see how districts’ salary paths compare within selected states.

Incentivizing teachers to stay on the job

A large body of research exists on differentiated pay for teachers, whether it is performance pay or additional pay for teaching in high-need/hard-to-staff schools or subjects. This research has found significant and positive relationships between performance pay and student achievement,⁹ especially for the most disadvantaged students,¹⁰ and between performance pay and teacher quality.¹¹

Similarly vast is the evidence in favor of additional pay for hard-to-staff subjects or schools. This additional pay has been found to not only increase teacher retention¹² but also to increase the high-quality teacher supply for those schools or subjects.¹³ However, not all differentiated pay is equally effective. Some researchers suggest that the most effective bonus percentage is around 14%,¹⁴ while others indicate that larger bonuses are better than smaller ones,¹⁵ over a threshold of 7.5% of bonus pay, or around $5,000/year ($150,000 in 30 years for the purposes of this study).

In spite of this evidence, only 16 out of the 90 districts in our sample offer some sort of differentiated pay for high-performing teachers.

• Within the districts that offer differentiated pay to high-performing teachers, the average annual bonus is around $5,000, or nearly 8% of the average teacher salary, ranging from the equivalent of $61 to nearly $26,000 per year.
• Depending on the size of the award, some bonuses are unlikely to have a positive effect on teacher quality. For example, high-performing teachers in Anoka-Hennepin School District (MN) receive an annual bonus of $180, or less than half a percent of a first-year teacher’s salary.
• Of the 16 districts in our sample that offer differentiated pay to high-performing teachers, 13 are below the bonus effectiveness threshold mentioned above, and only three stand above that level.
• Overall, there is a wide range of formats in differentiated pay:
  • Some districts offer this additional pay each year throughout a teacher’s career. These can range from nearly $200 as in the case of Anoka-Hennepin, to nearly $26,000 each year in the case of Dallas Independent School District (TX).
  • Other districts offer this type of differentiated pay only for a fraction of the teacher’s career. One such district is Baltimore City Public Schools (MD), in which high-performing teachers qualify twice in their career for a bonus of $1,000.

When it comes to teaching in high-need schools or hard-to-staff subjects, differentiated pay is more prevalent.

• 48 districts out of the 90 in our sample offer this extra pay, and with a wide range among the districts—for example, up to $350,000 in a 30-year career for a teacher in Charleston County School District (SC).
• Of the 48 districts in our sample that offer differentiated pay for teachers in high-need schools or hard-to-staff subjects, 37 offer bonuses below the $5,000/year effectiveness threshold indicated above.
• The average annual extra pay for districts that offer differentiated pay for teachers in high-need schools or hard-to-staff subjects is around $4,500, or nearly 7% of the average teacher salary, but districts offer this additional compensation in different formats as well, such as every year or only for a few years.
• For example, Atlanta Public Schools (GA) and Des Moines Public Schools (IA) offer around $5,000 of extra pay for teachers in high-need schools or hard-to-staff subjects, but only for the first five years of their career.
• Other districts offer this type of differentiated pay throughout the entire career of a teacher, ranging from about $300/year in the case of Wake County School District (NC) to $12,000/year in the case of Charleston County. Clearly, the size of this extra pay matters, with smaller amounts unlikely to have the impact the district seeks for attracting teachers to high-need schools or hard-to-staff subjects.

• Differentiated pay opportunities can also be compounded, as is the case for 54 of the districts in our sample, and make up for a large proportion of a teacher’s lifetime earnings. In the District of Columbia Public Schools, a teacher who is both high-performing and teaches in a high-need school or subject can make up to $900,000 more than a typical teacher over a 30-year career.
• Even with compounded extra pay, only 17 districts out of the 90 in our sample offer bonuses that stand above the effectiveness threshold of $5,000/year indicated by the research literature.

How salary structures can offer the wrong incentives for obtaining a master’s degree

It has long been established that there is no evidence that a master’s degree makes teachers more effective.¹⁶ However, in the country’s public schools, there is a larger proportion of teachers with master’s degrees (50%) than with only bachelors’ degrees (39%).¹⁷ That may well be because in more than half these districts, a master’s degree is the most straightforward way for a teacher to earn a higher salary. In this section we analyze the premiums that teachers receive for obtaining a master’s degree.

• Districts’ salary schedules define different earnings paths, and in most of them a master’s degree is the best way to get a more significant salary increase, in spite of the lack of evidence that such degrees make better teachers. Fifty-two out of the 90 districts in our sample offer larger average salary growth for teachers with a master’s degree than for those with only a bachelor’s degree (points to the left of the diagonal line on the graph below).
• Santa Ana (CA), Baltimore County (MD), Bismarck (ND), Sioux Falls (SD), Howard County (MD), and Montgomery County (MD) stand out for offering between two to four times as much salary growth to teachers with master’s degrees than to teachers with bachelor’s degrees. In Santa Ana, for example, the average salary growth for teachers with a bachelor’s degree is 0.3%. This rises to an annual growth rate of 2.2% for teachers with a master’s degree.

• The average lifetime salary premium for all professions of getting a graduate degree is $410,000, according to the Georgetown University Center on Education and the Workforce.¹⁸ For a teacher in our sample of districts, the average lifetime salary premium of getting a master’s degree is half that amount, nearly $200,000, or $7,000 per year over a 30-year career.
• The average lifetime monetary gain (net of costs) of getting a master’s degree for a teacher is between $137,000 and $172,000, depending on whether the teacher gets the master’s before beginning to teach or while teaching. That makes the average gain for a master’s degree just above $5,000 per year for a 30-year teaching career.

• Teachers can increase their gains (or reduce their losses) if they get a master’s while teaching. In the cases where the school or district assumes at least a portion of the cost, the gains from a master’s degree are even higher, although still about half the gain from a master’s in other professions. The following graph shows the net gain distribution for a typical teacher of obtaining a master’s degree while teaching, assuming no tuition reimbursement.

• Fresno Unified School District (CA) stands out for the stark contrast in earnings between a teacher whose education ends with a bachelor’s degree and a teacher who obtains a master’s degree. Teachers in this district who don’t add any education credits beyond their bachelor’s (a very small percentage of their teacher workforce, according to district representatives) would receive the same salary throughout their career, which means that other than cost-of-living adjustments, they would experience a salary growth of zero. The lifetime earnings for a typical teacher with only a bachelor’s degree in Fresno is calculated at $1.5 million. Were that teacher to pursue a master’s degree after they’ve been hired, their lifetime earnings would increase by almost 50%, to $2.2 million. The teacher with a master’s degree would experience an average annual salary growth of 1% in addition to cost-of-living adjustments. This means that, in order to experience any salary growth, a teacher in this district must pursue additional education beyond a bachelor’s degree.¹⁹
• On the other hand, Dallas Independent School District does not differentiate salaries on the basis of degree attainment. The district only differentiates on the basis of performance and effectiveness.

Salaries are the quintessential incentive to attract the right teacher to the right position. Therefore, districts need to be strategic about how they pay.

1. Salary paths

• Starting salaries set the foundation for a competitive salary path. Competitive starting salaries act as a strong recruiting tool and aid with the formation of a quality teacher workforce from the beginning. Districts should examine how their starting salaries compare to neighboring districts.
• The size of salary growth rates and for how long teacher salaries grow and remain above certain thresholds define the rest of the salary path and therefore teachers’ earning potential. All of these are likely the factors that teachers weigh when considering whether to remain in a school district.
• Salaries that grow too little throughout the teacher’s career and max out too soon could discourage retention of experienced teachers. In 23 out of the 90 districts in our sample, salaries grow at an annual rate below 1%, and in 15 of those they grow for less than half of the typical teacher’s career span.
• Detroit Public Schools Community District’s recent restructuring of its teacher salary schedules acknowledges these facts: starting salaries are over 30% higher, and even though salaries reach their maximum sooner, salary growth rates to reach the maximum salary are larger, making it a steeper schedule.

2. Differentiated pay

• Districts overall don’t make enough use of differentiated pay for high performance, which has been proven to result in a higher-quality teacher pool. Only 14 districts in our sample of 90 do so.
• Similarly, differentiated pay to attract teachers to hard-to-staff subjects or schools is still underutilized. About half of the districts in our sample offer it.
• In some cases, the extra pay may not be significant enough to accomplish its purpose. A meta-analysis of research on differential pay indicates that extra pay above its current median value of 7.5% is associated with larger positive effects.²⁰ Only 18 of the districts in our sample offer extra pay above that threshold.
• Teachers in many districts are pursuing master’s degrees not necessarily as a means to higher effectiveness but as a sure way to achieve a higher salary path. Districts would be better off redirecting additional pay for higher degrees to pay competitive starting salaries, increase the steepness of the salary curve, and provide incentives for high-performing teachers or attracting teachers to hard-to-staff positions.
• Austin Independent School District has reduced the amount of extra pay for different degrees, and instead has implemented differentiated pay policies for high-performing teachers and teachers in hard-to-staff schools or subjects. This extra pay can even combine for high-performing teachers who teach in a high-need school or subject and make up for about 30% of a teacher’s lifetime earnings.

3. Relative pay

• Districts must consider relative pay compared to other professionals in the area. Lower relative salaries can become a significant deterrent to attracting people to the teaching profession or to retaining effective teachers, especially those whose content knowledge is transferable to other industries—for example, hard-to-staff positions such as math and science.
• It is critical for districts to look at what their neighbors are doing, especially within the same state where license reciprocity is not an issue. Districts might lose much-needed talent to neighboring districts or states if compensation policies don’t measure up.
• District of Columbia Public Schools appear to understand how critical relative pay is to attract the right teachers. Not only do they pay the highest teacher salaries in the D.C. metropolitan area (which includes Southern Maryland and Northern Virginia), but they also pay salaries that are comparable with other professionals in their locality.

Clark County (NV) overall stands out for their salary practices. Even though their starting salaries are slightly below the average of our sample, their real salary growth is the highest in our sample, at 2.8% annually, so that teachers with a bachelor’s degree cross the $75k threshold in just 12 years, giving their teachers 18 years above the threshold, and 10 years at maximum salary. Clark County also offers the fourth highest differential pay for teachers in high-need schools or subjects, although it does not offer any kind of performance pay.

Overall, Clark County stands at #3 in the lifetime earnings ranking for teachers with a bachelor’s degree, and at #8 for teachers with a master’s degree, even though they don’t award extra pay for advanced degrees. This means that all of their teachers are paid top salaries. Clark County also makes sure that their teachers earn competitive salaries, and their average teacher salary is about 15% higher than comparable professionals in their locality.

Columbus (OH) is consistently in the top 15% of our rankings. They pay above average starting salaries, real teacher salaries grow over 2% annually for the duration of the teacher’s career, and teachers cross the $75k threshold after 13 years of service.

Columbus also makes use of differential pay in significant amounts for both high-performing teachers and teachers who teach in high-need schools or subjects. Even though Columbus does offer extra pay for degree attainment, the magnitude does not overshadow the differential pay for teacher performance or high-need placement. Columbus stands at the top of the ranking for teacher pay differential versus other professions. Columbus teachers make on average 27% more than comparable professionals in their locality. Overall, Columbus stands at #5 in the lifetime earnings ranking for teachers with a bachelor’s degree and at #6 for teachers with a master’s degree.

Albuquerque (NM), conversely, stands at the bottom of most of our rankings. They offer one of the lowest starting salaries and below average salary growth (less than 1% per year). Teachers in Albuquerque never cross the $75k threshold, whether they hold a bachelor’s or a master’s degree. The district stands second to last and last in the lifetime earnings rankings for teachers with a bachelor’s or a master’s, respectively. Albuquerque also does not offer competitive salaries, as teacher salaries stand on average about 20% below comparable professionals in their locality. Albuquerque does pay a small premium for getting a master’s, which overall does not translate into a net gain for their teachers. Albuquerque does make substantial use of differential pay for attracting teachers to high-need schools or subjects.

Prince William County (VA) also stands consistently toward the bottom of most of our rankings. Even though their starting salaries are just slightly below average, annual average salary growth stands at 1%, and Prince William County teachers never cross the $75k threshold. Prince William County does not make use of any type of differential pay for attracting and retaining high-performing teachers or teachers to high-need schools or subjects, but they do offer extra pay for degree attainment, as the more obvious way for a teacher to get a salary increase. In spite of that, Prince William County stands at #87/90 in the lifetime earnings’ ranking for teachers with a bachelor’s degree and at #86/90 for teachers with a master’s. Prince William County also stands toward the bottom of the competitiveness ranking, as it offers its teachers salaries that are over 20% lower than comparable professionals in their locality.

NOTE: All comparisons are based on salaries adjusted for regional cost of living.

What’s the impact of COVID-19 on salary schedules?

As the coronavirus pandemic brought portions of the economy to a halt, tax revenue and state funds for education have suffered too, and in some states more than others, with natural implications for school districts’ budgets. Even as we develop this study on compensation, we are aware of the difficulties of investing in more attractive and competitive salary paths for teachers that the current environment presents.

In our latest examination of salary schedules for the 2020-2021 school year, although only halfway through our district sample, we have seen that one third of the districts for which we have collected salary schedules have enacted a 0% cost-of-living adjustment (COLA) and a small percentage have reported step freezes. Some, like Cherry Creek School District (CO) and Fulton County Schools (GA) have resorted to both a 0% COLA and a step freeze.

As funds from the American Rescue Plan Act reach the districts, it is still too early to tell how they will be allocated, but we are  hopeful that a significant portion will be directed toward closing the instructional gap that was generated during the pandemic. Talent allocation will be key to bridge that gap, especially for the most disadvantaged students. As districts evaluate how to best use the funds from this federal act, compensation cannot be placed on the back burner, as it will be an essential tool to allocate the most effective teachers to the students that need them the most.