The Effect of Wage Frictions on Teacher Quality and Student Outcomes: Are Math and Science Teachers Affected Differently?*

Using teacher level data from public, private, and charter schools, we examine how various school level wage frictions such as salary schedules and collective bargaining agreements affect the level of teacher quality across subject levels in U.S. high schools. We find that salary schedules have a significant negative effect on teacher quality, reducing quality by as much as 2-3%. The effect is particularly large in math and science and at the higher end of the quality distribution where the rigidity imposed by the schedules is most likely to bind. At the 75 quantile of the distribution we find an additional reduction in quality of nearly 3.5% for math and science teachers. We also find evidence that average class sizes are as much as 10-12% larger in schools with rigid wage structures. We further find that a reduction in this rigidity through the use of teacher incentive pay has significant positive effects increasing quality by approximately 1.5%. Finally, we examine the impact of our measurement of teacher quality and class size on student achievement outcomes and find significant effects in both graduation and college attendance rates. JEL classification: I2, I22, J44, J51