(NCES 95-829) Ordering information
The empirical analyses presented in this report are based upon a conceptual framework that has been used by economists for years to examine the relationship between prices and characteristics of goods and services: namely, hedonic price theory or, in this instance, hedonic wage theory. This conceptual framework builds on the notion that employees care about both the monetary rewards as well as the quality of their work environment, while employers care both about the wages they pay as well as the sets of productive attributes of the individuals they employ. The labor market processes that match employees to employers and ultimately individual workers to job assignments reveals information about these sets of preferences of employers and employees. The result is a set trade-offs between monetary rewards and the various sets of characteristics of employees and jobs. The analysis explores what schools and school systems value in teachers and, hence, are willing to pay more to acquire. At the same time, it reveals the extent to which teachers are willing to trade-off wages to work in more pleasant environments. In essence, this analysis helps illuminate what is important and what matters about teachers, from the viewpoint of school employers, and what matters to teachers.
Hedonic analysis also illuminates the trade-offs, both implicit and explicit, that confront employees. This analysis goes beyond the characteristics that are formally rewarded in salary schedules, such as degree level and longevity, and hence, one of the strengths of hedonic analysis is that it includes both pecuniary and nonpecuniary rewards. That is, such an analysis shows the comparative value in the market for teachers of obtaining a graduate degree, of teaching smaller class sizes, of choosing a career in private as opposed to public education, of working in disruptive schools, or of putting in more after-school hours.
Patterns of teacher compensation reflect, at least in part, the forces of supply and demand. Value is shaped by the balance or imbalance between supply (i.e., the degree of availability of some quantity or characteristic) and demand (i.e., the extent or need for some quantity or characteristic). From this viewpoint, shortages are a temporary imbalance between supply and demand that will self correct in the absence of barriers to market forces.
Increases in compensation are one of the market forces that establish balance. That is, shortages of particular types of teachers or in particular types of schools will be reflected in higher salaries. By isolating what factors are related to higher salaries, hedonic analysis illuminates potential areas and qualities experiencing shortages.
Finally, hedonic wage analysis is a reflection of "what is" as opposed to "what ought to be." That is, it reveals the current market value of teacher characteristics: what schools are willing to pay for in the market for teachers. It does not, however, reveal which characteristics should be valued. It does not necessarily provide a guideline to schools of which teacher characteristics are the most productive.
The interpretation of these effects suggests that both supply- and demand-side factors are working and that in some instances, they are not easily distinguished from one another. Both objective and subjective measures of the school and work environment have exhibited effects on salaries. In some instances, it is shown that more difficult work environments are associated with higher wages, all else equal. This suggests that providing similar teacher services to all types of students will require different salary levels for teachers.
It is important to recognize that although each variable or collection of variables is examined in isolation, the results reported in this study are derived from a multivariate analysis that allows the analyst to isolate the impact of each variable while controlling for all of the other factors that affect teacher salaries.1
Highlights of the findings of this study are presented below.
Public and Private Sector Salary Differences
Conservative Christian, Catholic parochial, and other religious-unaffiliated schools are the poorest paying, while Catholic, nonsectarian private, and special education schools are the highest paying nonpublic schools.
Between about 2 and 50 percent of this public-private difference can be accounted for by differences in teacher characteristics depending upon the private subsector.
Controlling for differences in teacher and school characteristics between the public and private sectors, one observes a residual difference in the salaries of teachers that is simply associated with the sector in which the teacher is employed. These public-private salary differences are the result of one or a combination of two alternative forces:
They reflect factors (e.g., certification requirements) that influence the free flow of teachers between the two sectors that may ultimately have the effect of reducing differences in salary levels.
Differences in Teacher Sex and Racial-Ethnic Background
Despite the fact that sex and race-ethnicity are not accounted for in formal salary scales in the public or private sector, some differences in the salaries of teachers are associated with sex and racial-ethnic background once other teacher and school characteristics are taken into account. Specifically,
Married females receive lower salaries than nonmarried females, while for males, no difference associated with marital status is identified, all else equal.
Racial-ethnic differences among teachers were observed only for male public school teachers. The only statistically significant difference in salaries observed related to racial-ethnic background is the 4 percent difference favoring white (not of Hispanic origin) males over blacks (not of Hispanic origin).
Differences in School Level
On average, secondary teachers earn more than elementary school teachers. In the public sector, this amounts to about 3.4 percent for females and 6.3 percent for males, while in the private sector, these differences amount to 13.1 percent for females and 14.8 percent for males.
More than half of the difference in the salaries of elementary versus secondary teachers in both sectors can be accounted for by differences in the characteristics of elementary and secondary teachers.
Differences in Teacher Qualifications and Effort
Public and private school teachers with higher degree levels earned higher salaries, all else equal. For example, a master's degree is associated with a salary increment of 11.31 percent for public school teachers and 8.20 percent for private school teachers. However, only public school teachers benefitted in terms of higher salaries associated with the acquisition of state certification. A public school teacher with a standard teaching certificate earns about 3 percent more than a teacher with no certificate.
In the public sector, undergraduate majors such as mathematics, business, and vocational education, which prepare teachers for potential, lucrative, noneducation sector careers as well as for teaching, seem to be associated with higher teacher salaries, all else equal. Salary increments are 2.37 percent for mathematics, 1.63 percent for business education, and 3.02 percent for vocational education. This pattern seems to be less true in the private sector.
Greater amounts of nonschool time spent by teachers on school-related activities are associated with higher public (0.11 percent per hour per week) and private (0.21 percent per hour per week) school teacher salaries, all else equal. Mentor teachers receive a wage advantage in the private sector (i.e., about 6.5 percent), but no relationship is detected in the public sector.
The Impact of Working Conditions on Teacher Salaries
Teacher salaries are systematically related to certain characteristics of the work environment. Hedonic wage theory would predict that, all else equal, teacher salaries would be higher in schools with more challenging, more difficult, and less desirable work environments.
Larger relative class sizes for individual teachers are also associated with higher salaries, although the effects are small in magnitude. For example, a 50 percent increase in class size (e.g., from 20 to 30 students) is associated with a 0.5 percent higher salary, all else equal.
Each of these characteristics of the work environment are associated with greater burdens and hence higher salary levels to compensate for these additional burdens, although in some cases the salary differences are relatively small.
Some of the results are opposite of what was hypothesized.
One could argue that the "better" teachers are assigned the jobs characterized by these attributes, and the inability to capture all of the appropriate teacher quality attributes in the present analysis prevent one from identifying the hypothesized relationships. Indeed, more comprehensive data on teacher attributes believed to be associated with "better" teaching will be needed in the future to determine the potential bias that may be reflected in the present results.
Limitations of the Present Study
As with most studies of this type, this study has certain limitations that will require future research to resolve.
Second, teacher quality is not a well-defined concept. The present dataset contains no information on such potential measures of teacher quality as the quality of the undergraduate institution of higher education attended, the level of the teacher's mathematics or verbal skills, or teaching ability (e.g., based on National Teacher Examination scores). In the absence of such quality or ability measures, the results of this analysis could be biased.
Third, further research needs to be done to examine the stability of the relationships observed in the present study. Which factors related to teacher salaries show persistent relationships over time? Do the patterns of compensation match conventional perceptions about the patterns of shortage and surplus in the markets for teachers (e.g., for mathematics and science teachers)? How do these patterns change over time?
The forces of supply and demand in the market for teachers underlie the determination of teacher salaries. Some of the forces represent general market forces common to all labor markets (e.g., male-female wage differences, the age earnings profiles, and the value of additional education), while some of the factors are clearly unique to the teacher market (e.g., class size effects and the perceptions of student behaviors). The results of the present study are consistent with the hypothesis that a complex array of factors underlie the processes of supply and demand for teachers and hence the determination of salaries. Teachers are not all the same, but are differentiated by their attributes. At the same time, districts and schools are not identical, but rather are differentiated by virtue of the work environment (e.g., types of students) they offer. Although not exhaustive, the present study illustrates some of the systematic patterns of variation in wages in relation to teacher and school characteristics. More than 60 percent of the variance in teacher salaries is accounted for by the collection of independent variables included in the statistical analyses presented in this report.
For more information about the content of this report, contact Kerry Gruber at Kerry.Gruber@ed.gov.