The Labor Market for Teachers Under Different Pay Schemes

Abstract

Compensation of most US public school teachers is rigid and solely based on seniority. This paper studies the labor market effects of a reform that gave school districts in Wisconsin full autonomy to redesign teacher pay schemes. Following the reform, some districts switched to flexible compensation and started paying high-quality teachers more. Teacher quality increased in these districts relative to those with seniority pay due to a change in workforce composition and an increase in effort. I estimate a structural model of this labor market to investigate the effects of counterfactual pay schemes on the composition of the teaching workforce.