Teacher Compensation

I did not go to public school, and have long found fault with many aspects of our public education system in this country. Which is why I find it strange to be semi-defending parts of the systeem. However, this article from the Wall Street Journal http://online.wsj.com/article/SB10001424052970203687504576655352353046120.html made so many erroneous claims that I felt compelled to dissect it.

Here is the insightful observation from their research: “[M]ost public school teachers would not earn more in private employment”. This supposedly means that public school teachers are overpaid. Their insight is that people who pursue education and spend years getting credentials and building up the particular skill set associated with teaching make more money teaching than doing something else. This is going to be true if we look at any narrowly defined field that requires some human capital (educational) investment. This would be true for truck drivers, surgeons, lawyers, basically almost any profession you can name. In an efficient economy, no worker would make more in any other job! This is neither an insight, nor a problem. To argue otherwise is both wrong. These guys should know better.

1. Selection Bias. They argues that because teachers are not as smart as others, they should be paid less. They fail to mention that the causality most likely runs the other way. High salaries attract would attract high quality teachers, low salaries attract low quality teachers. If teachers are so overpaid, than why do so few graduates desire to become teachers?

Because salaries are low, higher achieving students are not attracted to teaching. The converse of “if you can’t do, teach” is “if you can do, don’t teach”.

I suggest a different model. If teachers are truly overpaid, than the

2. The private sector retirement numbers are terribly unrealistic. No one the private sector invest all their money in treasury bills! According to my calculations the writer used an interest rate of around 2.5%, which is even less than a long term T-Bill! For years the standard, long run retirement interest assumption was around 7%. That difference is huge. With a 7% assumption the retirement annuity goes from his quoted $4,000 to $26,000, which is more than his public sector assumption. Even the more conservative assumption of 6% yields around a $19,000 annuity. These are smart people, and they know the assumption is bad. There is no excuse for this fudging of the numbers to prove a point. If you have a valid point, you can make it with valid numbers.

3. I don’t know any teachers that make $51,000.

4. How can you call an unemployed teacher a private school or public school teacher? The only way you could possibly make this distinction would be by looking at credentials, and if that is the case, it should not be surprising that credentialed teachers have a lower unemployment rate than non-credentialed teachers. This is not an indictment

Disclaimer: I am married to a former teacher, though she was a neuroscience major.


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