Key to Understanding Teacher Pay
Baumol Effect and the Cost of Good Teaching
Improving education by increasing teacher pay is somehow both the most overrated and underrated intervention in education policy. The trouble is that neither side of the debate really does it justice.
On one end, teachers unions fund massive amounts of research that frequently overstate how difficult teaching is as a way to basically shame people into paying teachers more. Along with that they often make cherrypicked arguments that underplay a lot of quality research that shows that the majority of student outcomes can’t be explained by teachers or schools. On the other end, a lot of conservative thinktanks write hit pieces on teacher pay that attack a lot of the weak arguments coming from the Left while simultaneously missing the point.
To sum it up, the research on the skills, stress, and hours worked of our current teachers shows that there is little evidence that they are underpaid.
So yes, our teachers aren’t currently underpaid in the traditional sense. But increasing teacher pay as a policy intervention for improving education overall is a completely different question. What matters instead is whether teachers in our ideal education system are underpaid. So, if our teachers and administrators are consistently implementing all of the best, evidence-based practices, and if they are consistently using data to inform their teaching while integrating culturally responsive pedagogy and trauma-informed classroom management…in that situation, are they underpaid?
Modern education is complicated, and excellent modern teaching demands that teachers are also data scientists, social workers, entertainers, and content experts. It is fantastically difficult to find people who are able to integrate all of these skills which leads into the next hard truth: we get what we pay for.
As it stands, teachers have some of the lowest test scores and lowest outside career prospects of any college educated discipline. There are, of course, many amazing teachers in the US, but the discipline fails to consistently attract the best talent for the simple reason that it doesn’t (and perhaps can’t) pay enough.
Take my friend, Jackson. He’s fantastic high school math teacher at an urban school in Texas. He studied STEM in college and has experience in computer science. Right now he makes about $50k a year as a teacher despite having the skills to very easily make at least $75k as a data scientist. He meets all of the needs of the modern teacher and he does his job well, but he almost can’t afford to continue teaching given the tremendous long-term opportunity cost.
This problem at the heart of this is the Baumol Effect, or Baumol’s cost disease.
The standard definition is “the rise of salaries in jobs that have experienced a low increase in labor productivity, in response to rising salaries in other jobs that have experienced higher labor productivity growth.”
The simple definition is “as countries get richer, all highly skilled jobs become more expensive because the alternative jobs are so lucrative.”
Let’s take the case of Julie and Alexey. It’s 1980 and Julie and Alexey are both mathletes in high school who end up scoring in the top .1% of all students in their respective countries. Julie lives in the US, Alexey lives in the USSR. They get the same grades through high school and college, but as soon as they leave they have very different options. Julie can decide to go into lucrative careers in finance or consulting, but Alexey really only has one option: become a teacher. The USSR doesn’t have to pay that much in order to get a talented content expert like Alexey into the classroom, after all there aren’t any other high paying options. But the US has to compete with other possible 6-figure salaries to have a shot at employing Julie.
On a macro scale, that pushes up the salary for most skilled work. But it creates a deeper problem for education. It will not only push up the salary for the average college student, it will skyrocket the salary for the most competitive college students because their opportunities have increased so significantly. And since our ideal education requires such talented teachers, it makes the ideal system extremely costly.
In other words, the better the economy the more costly the education.
So, because of the Baumol effect, it is very expensive to attract the most qualified people into education. That’s why teacher pay is such a mess. The cost may just be too prohibitive to be a viable policy option. We need to look for some equilibrium. I’m not exactly sure what that may be, but my hope is that the best schools of the future will be able to drastically increase teacher pay while limiting costs by more effectively using computer-assisted personalized learning. Either way, the system will need to drastically change to accommodate a growing economy while still providing a high-quality of education to our millions of American children.
