The Economics and Politics of Teacher Merit Pay

The debate over merit pay can be summed up as follows: economists like it, voters love it, and teachers are divided. Can merit pay be made to work? I survey three sets of data that are relevant to answering this question: impact studies of teacher merit-pay schemes, evidence on teacher attitudes to merit pay, and surveys of attitudes in the general public to merit pay. Looking at the existing merit-pay plans, one is struck by the fact that their incentive schemes are often very complicated, and most estimates are of short-run effects (so do not capture selection into the teaching profession). Teacher attitudes are mixed, with new teachers more open to merit pay than their more experienced colleagues. Teachers are particularly hostile to merit-pay schemes based on test scores, raising a particular challenge for the political sustainability of such plans. I conclude with 10 suggestions for future research on teacher merit pay.