EFFECTS OF DEREGULATING TEACHERS’ PAY: Evidence for England

16 Apr 2019

Since the replacement of teachers’ pay scales with compulsory performance-related pay in 2013, teachers have seen lower growth in salaries. But in schools where teachers have more ‘outside options’ (such as jobs in other schools or higher pay in non-teaching jobs), teacher salaries have been relatively protected.

These are among the findings of research by Simon Burgess, Ellen Greaves and Richard Murphy, to be presented at the Royal Economic Society's annual conference at the University of Warwick in April 2019. They conclude that the competition for teachers has been a key driver of the changes seen in teachers’ pay since the reforms.

The researchers study a major reform to pay setting for teachers in England, which effectively deregulated the teacher labour market. The reform abolished seniority rules in pay setting and annual progression based on experience (pay scales). In conjunction, schools no longer had to match the pay scale point any newly appointed teachers had at their previous schools.

Before the reforms, around 60% of all classroom teachers received a pay award in line with pay scale progression. Schools responded to the reforms by reducing the percentage of teachers that received this ‘expected’ pay progression – after the reforms, this fell to below 40%.

The proportion of spending on teachers declined significantly for primary schools after the reforms: by around 6-7 percentage points. This is an economically meaningful amount, equivalent to around 11% of the pre-reform spending on teachers.

This result implies that before the reforms, primary schools were forced to pay some teachers more than they would optimally choose. The reforms allowed primary schools to re-optimise and spend proportionally more on other things. It must be remembered, however, that the reforms took place during a period of public sector austerity. This finding may therefore be different in situations with larger or increasing school budgets.

The study finds evidence that schools compete with other sectors for workers. Schools in areas with high non-teacher wages decreased teachers’ pay progression by less than areas with low non-teacher wages.

This supports the theory that teachers’ pay is more competitive where labour market opportunities are good, because teachers have a better ‘outside option’ to the classroom. The findings suggest that the negative effect of the reforms on teachers’ pay progression would be offset by around a £3 per hour increase in local non-teacher wages.

Schools also compete with other schools for teachers. Schools in areas with more local schools decreased teachers’ pay progression by less than areas with fewer local schools, although the number of local schools would have to increase dramatically to offset the overall effect of the reforms.

The study also finds that in these highly competitive areas, there is more dispersion in the rate of pay progression within schools. The authors conclude that in areas of high competition, given their limited budgets, schools are compelled to pay teachers more in line with their performance.

The study uses a census dataset tracking the pay of every teacher in England from 2010 to document the impact of the teachers’ pay reforms and local labour markets on pay progression. These results are applicable to other market-oriented public school systems worldwide, with similar current levels of teacher to non-teacher spending.

Previous research has shown the detrimental effect of centrally determined national public sector pay on pupil attainment. The new study suggests that removing the national pay scales has increased the variation in teachers’ pay progression and the responsiveness of teachers’ pay to the other local options for teachers.

Future research will consider the impact of the removal of teachers’ pay scales on pupil outcomes in addition to the outcomes for teachers and schools shown in this study.

 

Deregulating teacher labour markets by Simon Burgess, Ellen Greaves and Richard Murphy

Ellen Greaves

020-7291-4800 | ellen_g@ifs.org.uk

Simon Burgess

University of Bristol | 0117-928-8436 | Simon.burgess@bristol.ac.uk

Richard Murphy

University of Texas | Richard.murphy@autin.utexas.edu