The potential gains to the United States from a better educational system are enormous.
The Programme for International Student Assessment (PISA) is a standardized assessment of the knowledge and skills of 15-year-olds in the major developed countries. Consider what would happen if the U.S. improved the skills of its workforce enough to raise PISA scores by 25 points, from slightly below the industrial-nation average to slightly above the industrial-nation average.
According to good economic estimates, the value of a permanent 25-point increase in U.S. test scores would be more than $40 trillion over the next 80 years.
We know that’s possible because other countries have improved their test scores by 25 points or more. Poland did it in reading from 2000 to 2006, and Brazil did it in math from 2003 to 2009. A 25-point increase would bring the United States mathematics level to about that of Germany and Australia. U.S. scores would still be below those in Canada and well below world leaders such as Finland, South Korea, and Singapore.
At first, the gains from this increase in the quality of education would be small and would accrue mostly to the better-educated individuals. Over time, however, the proportion of the workforce that was better educated would increase. The gains to society would soar as better-educated workers interacted with other better-educated workers. When a better-educated worker joins your team it’s not like adding another person to a tug-of-war in which the new worker’s strength is simply added to your own. It’s like adding a new and different tool to your team’s toolbox, greatly expanding the total of what is possible.
Ultimately, according to good economic estimates, the value of a permanent 25-point increase in U.S. test scores would be more than $40 trillion over the next 80 years. That is an astronomical increase in wealth. In the context of the American economy over one lifetime, however, $40 trillion is an achievable gain. Small but permanent improvements in the skill level of a large population have vast payoffs.
How might we actually achieve this 25-point increase in student knowledge and skills? Via better teachers. Specifically, we need to give better rewards to the best instructors. Teachers today are paid more when they have more experience and more advanced degrees, but such teachers are not necessarily better teachers. In 2007 alone we wasted $80 billion paying bonuses to teachers for factors that had little or nothing to do with the quality of their teaching. We may as well give teachers bonuses based on the whether their last name contains the letter Q.
Teachers differ enormously in their ability to raise student achievement. Within the same school are great teachers and not-so-great teachers, and the difference is measurable. At the end of the year some students will learn much more than others, simply because they have been assigned to better teachers. And we know that student achievement matters for adult earnings.
So what is a quality teacher worth? One calculation is that a teacher who is just slightly better than average (in the 60th percentile) will raise the discounted lifetime earnings of a student by $5,292 more than will an average teacher (50th percentile). That may not seem like a lot of extra value over a lifetime, but remember, this is just one student over one year. In a class of 20 students that’s a gain of $105,840, and that gain accrues annually for every year of teaching. A teacher who is a lot better than average will increase the earnings of her students by hundreds of thousands of dollars. The importance of teachers begins at an early age. Compared with a mediocre kindergarten teacher (25th percentile), a great kindergarten teacher (75th percentile) creates some $320,000 of annual value for a class of 20.
If we replace the bottom 5 percent of teachers with teachers of just average quality, hundreds of billions of dollars of additional annual economic output will result.
And these numbers are an underestimate of the total gains to society. Better students not only go out into the world and earn more for themselves, they also turn into scientists and engineers who innovate and create more value for everyone. Better students also turn into citizens who build better institutions for economic growth.
If we could improve our selection procedures so that the bottom 5 percent of teachers were replaced with teachers of just average quality, that would be more than enough to generate $40 trillion in value. And we know enough about measuring teacher quality to, over time, substitute the bottom 5 percent of teachers with teachers of average quality.
Politically, however, any violation of the “no one gets fired” rule is opposed by the powerful teachers’ unions. Firing a teacher in New York is “virtually impossible” says Joel Klein, New York’s former chancellor of schools. Since firing teachers after they have tenure is a nonstarter, Klein proposed that teacher quality should be used to help to decide whether a teacher should get tenure in the first place. Klein’s modest proposal would have given the top 20 percent of teachers a bump up in tenure points and the bottom 20 percent a bump down. The United Federation of Teachers, however, mobilized its forces and barred New York from using student test scores in tenure decisions. Michelle Rhee, the controversial and hard-charging former chancellor of the District of Columbia public schools, tried to offer teachers better pay in return for giving principals greater flexibility in hiring and firing decisions, but the Washington Teachers Union and the American Federation of Teachers refused to even allow teachers to vote on the proposal. Rhee later lost her job, due in no small part to union opposition.
At times, teacher pay in the United States seems more like something from Soviet-era Russia than 21st-century America. Wages for teachers are low, egalitarian, and not based on performance. We pay physical education teachers about the same as math teachers despite the fact that math teachers have greater opportunities elsewhere in the economy. As a result, we have lots of excellent physical education teachers but not nearly enough excellent math teachers. The teachers’ unions oppose even the most modest proposals to add measures of teacher quality to selection and pay decisions.
Reward teachers based on skills and measured student performance, not on irrelevant details such as certification, experience, or advanced degrees.
Soviet-style pay practices helped to eventually collapse the Soviet system, and the same thing is happening in American education. But there are reasons to hope for something better. Rhee is no longer the D.C. chancellor, but IMPACT, the teacher evaluation system developed under her tenure, is in place. IMPACT uses student scores to evaluate teachers, along with five yearly in-class evaluations, three from the school administrator and two from master educators from outside the school. Charter schools and voucher programs for private schools are also expanding in many states, which will encourage greater flexibility in teacher hiring and evaluation.
A teaching policy for the 21st century will reward teachers based on skills and measured student performance, not on irrelevant details such as certification, experience, or advanced degrees. A 21st-century teaching policy will pay teachers more and bring teacher salaries back into line with those of other professions such as lawyers and doctors. As in other professions, however, not all teachers will be paid the same. Most teachers will thrive in a system that offers greater pay for greater performance, as will the students.
Alex Tabarrok is an associate professor of economics at George Mason University. This piece was adapted from his new e-book Launching The Innovation Renaissance: A New Path to Bring Smart Ideas to Market Fast, TED Books, November 2011.