Unless I’m misreading her, Federal Education Minister Julie Bishop appears to have taken the view that it’s possible to move to merit pay without raising average pay.
Politically, I can’t see how this is workable. All the merit pay schemes I’m aware of (eg. Denver, Cleveland, Florida, Israel, UK) have been what economists call a Pareto improvement â€“ no teachers are paid less, and some are paid more.
Economically, raising average teacher pay probably makes sense too. Chris Ryan and I have been beaten up a bit by teacher unions for our paper on trends in teacher aptitude. But I suspect they wouldn’t be unhappy with Figure 13, which put together a 30-year series on how starting teacher pay compares with the pay of new graduates (in case you think this is all about the denominator, see also Appendix Figures 2-5). Teacher pay has steadily declined relative to new graduates. The same is true if you compare teachers to a different group, such as all professionals, or all workers. I have another paper showing that a 1 percent rise in the salary of a starting teacher boosts the average aptitude of students entering teacher education courses by 0.6 percentile ranks. If merit pay raised average teacher wages, that would be no bad thing.