An increasing number of states and school districts across the country are tying teacher pay to student performance. A recent RAND Education study found that nationwide spending on teacher performance pay increased from $99 million in 2006 to $439 million in 2010. However, many states and school districts face significant hurdles when they attempt to implement incentive pay programs. In fact, some states and school districts have scaled back or even discontinued their programs because of budgetary constraints and research that has found minimal impact on student achievement as a result of performance pay programs. Critics of incentive pay programs claim that there are currently no valid and reliable student growth measures that can be used for high-stakes decisions like teacher compensation. Furthermore, states and districts have found that it is particularly difficult to develop student achievement measures with which to accurately evaluate teachers in untested grades and subjects. This report summarizes the difficulties these states and school districts have encountered. A brief summary of the status of some of the more notable teacher performance pay plans around the U.S. is also included, divided into the following three sections: States and Districts Discontinuing or Reducing Funding for their Performance Pay Programs; States and Districts Implementing New Performance Pay Programs; and States and Districts with Continuing Performance Pay Programs. Based on strong encouragement from both the federal and state governments to implement performance pay programs and in spite of the difficulties locations have encountered when launching these initiatives, this report found that many states and school districts continue to investigate the use of performance pay as a way to improve student and teacher performance. It therefore appears that compensation systems linking teacher pay to student achievement will be a part of the national educational landscape for the foreseeable future.

Although there is a growing recognition that the traditional teacher salary schedule does not reward the most effective teachers, most U.S. school districts don't offer teacher incentives for improving student performance and the vast majority of teachers actually oppose such a plan. This Information Capsule reviewed recent studies conducted on the impact of performance pay programs on students' academic achievement and found that they have produced mixed results. Most researchers have concluded therefore that higher levels of student achievement cannot be directly attributed to performance pay programs. The multitude of factors involved in human learning lessens the impact of market-based strategies, on which performance pay is based. A summary of elements of successful performance pay programs is also provided.

This paper estimates the effect of exposure to teacher pay-for-performance programs on adult outcomes. We construct a comprehensive data set of schools which have implemented teacher performance pay programs across the United States since 1986, and use our data to calculate the fraction of students by race in each grade and in each state who are affected by a teacher performance pay program in a given year. We then calculate the expected years of exposure for each race-specific birth state-grade cohort in the American Community Survey. Cohorts with more exposure are more likely to graduate from high school and earn higher wages as adults. The positive effect is concentrated in grades 1-3 and on programs that targeted schools with a higher fraction of students who are eligible for free and reduced lunch.

While the idea of teacher performance-pay is increasingly making its way into policy, the evidence on the effectiveness of such programs is both limited and mixed. The central questions in the literature on teacher performance pay to date have been whether teacher performance pay based on test scores can improve student achievement, and whether there are negative consequences of teacher incentives based on student test scores? The literature on both of these questions highlight the importance of not just evaluating teacher incentive programs that are designed by administrators, but of using economic theory to design systems of teacher performance pay that are likely to induce higher effort from teachers towards improving human capital and less likely to be susceptible to gaming. Also, while there is a growing body of high-quality empirical studies on the impact of teacher performance pay on education quality, most of these evaluations stop after two or three years, and so there is no good evidence on longer-term impacts (both positive and negative) of teacher performance pay on students who have completed most of their education under such a system. In this paper, the author contributes towards filling this gap with results from a five-year long randomized evaluation of group and individual teacher performance pay programs implemented across a large representative sample of government-run rural primary schools in the Indian state of Andhra Pradesh (AP). The main questions addressed in this paper are: 1) What is the impact of teacher performance pay (implemented for five years) on student test scores at various points of program exposure? 2) Are there any negative consequences of the teacher performance pay program? 3) What is the relative effect of group and individual teacher incentive programs? There are three main results in this paper. First, the individual teacher performance pay program had a large and significant impact on student learning outcomes over all durations of student exposure to the program. Students who had completed their entire five years of primary school education under the program scored 0.54 and 0.35 standard deviations (SD) higher than those in control schools in math and language tests respectively. These are large effects corresponding to approximately 20 and 14 percentile point improvements at the median of a normal distribution, and are larger than the effects found in most other education interventions in developing countries (see Dhaliwal et al. 2011). Second, the results suggest that these test score gains represent genuine additions to human capital as opposed to reflecting only "teaching to the test". Students in individual teacher incentive schools score significantly better on both non-repeat as well as repeat questions; on both multiple-choice and free-response questions; and on questions designed to test conceptual understanding as well as questions that could be answered through rote learning. Most importantly, these students also perform significantly better on subjects for which there were "no incentives"--scoring 0.52 SD and 0.30 SD higher than students in control schools on tests in science and social studies (though the bonuses were paid only for gains in math and language). There was also no differential attrition of students across treatment and control groups and no evidence to suggest any adverse consequences of the programs. Third, the authors find that individual teacher incentives significantly outperform group teacher incentives over the longer time horizon though they were equally effective in the first year of the experiment. Students in group incentive schools score better than those in control schools over most durations of exposure, but these are not always significant and students who complete five years of primary school under the program do not score significantly higher than those in control schools. However, the variance of student outcomes is lower in the group incentive schools than in the individual incentive schools. The authors measure changes in teacher behavior and the results suggest that the main mechanism for the improved outcomes in incentive schools is not reduced teacher absence, but increased teaching activity conditional on presence. Finally, the authors also measure household responses to the program--for the cohort that was exposed to five years of the program, at the end of five years--and find that there is no significant difference across treatment and control groups in either household spending on education or on time spent studying at home, suggesting that the estimated effects are unlikely to be confounded by differential household responses across treatment and control groups over time.

Reviewing the research literature on performance pay (or teacher pay incentive) systems in the United States, the author explores some of the most prominent proposed and practiced systems. He explores positive and negative outcomes for the various systems and provides recommendations on how to implement performance pay systems. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).

This book provides an invaluable resource for school teachers, administrators, board members, policy makers, and citizens who would like to understand what's behind performance pay, what might work and what will not, and how to build a school improvement effort that includes teacher compensation as one of its strategies.

There have been many programs and initiatives used throughout the United States that have answered the call of educational reform; however, performance pay programs continues to lead the discussion of incentives to improve academic achievement. Nevertheless, there continues to be a lack of clarity regarding its effectiveness. In addition, to addressing the challenge of improving academic achievement, performance pay is also being recognized as a tool to assist with teacher retention which has become a serious issue for many school districts across the nation. While many teachers are retiring, many others are taking the option of leaving the profession due to low moral, low compensation, and/or unfavorable working conditions. Many Americans are aware of the importance of having quality teachers in the classroom in order for students to excel. However, even more are beginning to acknowledge the necessity for increasing teachers' salaries as a means of retaining the best and the brightest. The purpose of this study is to determine school principals' perceptions of teacher performance pay programs, specifically in Tennessee. This study also addresses the issues of gaining and retaining quality educators through the implementation of performance pay programs and investigate the principals' perception of pay for performance as motivating factors for teachers and principals to help increase student achievement. Since performance pay has been such a polarizing topic in the education field, this study also examines principals' perceptions of performance pay programs as fair and equitable and whether performance pay improves the instructional effectiveness of teachers. Through this study, the researcher gained greater insight into the thoughts, and opinions of principals in Tennessee regarding the impact of teacher performance pay. While the analysis from Tennessee principals' perceptions from this study did not vary much from other studies, it does suggest that if a performance pay program is to be successful in the state of Tennessee it must be open to all schools in a school district, transparent, and substantial to motivate action. But most importantly, it cannot be a standalone program. There must be other initiatives that will aid in student achievement.