Stagnation in student performance, can performance related pay be the solution?
Danyun Zhou & Yanhan Cui (BSc. Economics 2013)
Factandmotivation:
Teachersface insufficient incentive toexerteffort
In recent year, despite the high percentage
of education spending in U.K., there has
been stagnation in student performance
measured both in standardised test scores
and PISA test scores1. Such paradox boils
down to the economic idea of moral
hazard that teachers do not have enough
incentive to exert efforts. In U.K. and many
other
OECD
countries,
teachers’
performance pay has been introduced as a
potential solution.
Teacher’seffectiveeffortimproves student performance
Incentiveschemescanelicitmoreeffectiveeffortsfromteachers
Incentiveschemescan improvestudentperformance
Key question: CaninventiveschemessuchasPRP,
improveteachers’effortineffectiveteaching?
- The condition for introducing performance pay become - If the chosen level of t2 is large enough and/or the
more stringent if two tasks are perfect substitutes (i.e.,
contribution of t2 to human capital is significant enough
teacher can substitute coaching for effective teaching while
to compensate for the loss of effective teaching, then
keeping effort constant);
performance pay should be introduced.
- If coaching is more effective in improving test score (i.e., - The size of incentive should depend on how close
g2>g1), teacher’s optimal choice is to put all effort in
teachers’ performance reflect their contribution to
coaching;
students’ gain in human capital.
- The overall effect of performance pay depends on the
amount of effective teaching prior to the introduction of - Full incentive should be provided if p is a perfect measure
of h (i.e., f1=g1and f2=g2), the further we are away from
incentive and the technology of class room introduction (i.e.,
this condition, the more coaching will likely to be induced.
the values of f1 and f2);
Whatcanwelearnfromthemodel?
- Substitutabilitymatters
- Suppose t1 to be effective teaching and t2 to be
coaching;
- If effective teaching and coaching are not perfect
substitutes, the condition
for introducing
performance pay (i.e., b>0) is weak: as long as one
contributes to both h and p, the other task
contributes to either or both, and neither task
reduces h or p.);
Effectiveness of PRP system: Problems with PRP system:
PRP in EnglandandWales1999Initially positive effects on
• Progression to the Upper Scale
Performance Threshold system student performance
were
Annualextra
bonusof
£2000until
retirement
Upper Pay
Scale with
performance
-related pay
Thresholdtest
observed, approximate 40% of
Value added grade per child for
eligible teacher.
The evolution of students’•
standardised test scores (Fig. 3)
suggested these effects had
diminished in later years.
√
Teachersattoppointcan
applytopassthe
Performancethreshold
became ‘automatic’ in later
years, and reduced incentives
within the Main scale.
The programme has awarded a
very high proportion of
applications (97%),
and
transferred
the
incentive
scheme into an unconditional
pay rise for all eligible teachers.
• The guidelines for execution of
the programme were too
complicated.
Majority of
teachers found that the policies
in terms of performance
measure and reward design
were difficult to understand.
MainPayScale
Fig. 1
Teachers’remunerationsystemin Similarities to PRP in U.K.:
• The system is applied to national level;
Sweden1996• Local accountability is guaranteed.
Target sample size: across all regions and Differences to PRP in U.K.:
municipalities in Sweden.
• The
fixed ladders within teachers’
progression were abandoned;
Reward design and performance measure:
• Completely individual-based incentives • Ladders for progression remained in both
Main and Upper Pay Scale in U.K.
with no fixed ladder for teachers’
Implications on U.K.’s PRP reform:
progression;
• Highly decentralised system with local • Assign local accountability to school’s
management level in terms of teacher’s
accountability.
performance maximisation.
Results:
• Each municipality developed its own • Include more direct measurement of
student performance and progress in
criteria for the performance evaluation;
teachers’ appraisals.
• Unclear link between performance and
pay;
• Provide relevant trainings to improve
• Teachers reported negative impacts to
evaluator’s assessment ability.
their working environment;
• Impose upper limits on the monetary
• No improvements in Sweden’s PISA test
value of incentive to avoid budgetary
scores.
concerns.
What can we learn from other PRP schemes?
CareerLadderEvaluationSystemin Similarities to PRP in U.K.:
Tennessee,U.S.1985-1989
Scaled payment structure in which teachers apply for pay
Targetsamplesize:79schoolsstatewide
l
l
progression on an optional basis;
Performance was assessed by principals against authorityapproved standards.
Differences to PRP in U.K.:
• Greater emphasis on teachers’ professional development
• Teacher performance measurement is subjective in all
components;
(Atkinsonetal,2004,2009,MarsdenandBelfield,2007);
• Trainings are provided to evaluators who need to pass
tests beforehand and are subject to follow-up reliability
checks.
Results:
• Large increases in mathematics scores;
• No impact on reading scores.
Implications:
• Provision of compulsory training and follow-up reliability
check for evaluator to ensure the quality of decisionmaking;
• Incorporation of financial incentive with non-financial
incentive (professional recognition) to reinforce teacher’s
response.
ComparisonandConclusions
IsraelExperimentin2000-2001
Target sample size: 49 schools with
matriculation rate ≤ 45%;
Results:
• Significant improvement in Math
and English test scores from
enhanced teaching methods;
• No evidence found for score
manipulation;
• Students with weak performance
prior to the programme achieved
higher improvement.
Differences to PRP (1999-)
• Short-term experiment lasted only for one
year;
• Use student performance as the only
measure of teacher performance;
• Rewarded relative performance instead of
absolute performance improvement;
• Rewards are given in the form of one-off cash
bonus.
Implications:
• Simplify performance measurement and
increase the weight of objective measure to
induce stronger responses by teachers;
• Introduction of tournament among teachers
to avoid a general pay rise and also reduce
the scope of collusion and corruption.
The effectiveness of PRP depends on :
Suggestions for potential PRP reform in U.K.
1. Simplicity in the incentive design. Despite the variations in scheme
design, the PRP was most effective in the case where reward and
performance measurement was simple and straightforward;
• Simplify performance criteria and the methods of assessment. Enable
better understanding and induce stronger responses by teachers;
2. The degree of school’s autonomy. Local accountability improves
efficiency of resources. But, decentralisation should be incorporated with
government guidance for effective incentives;
*Complexity: number of components in the performance measure
** Size of financial incentive: annual bonus valued in dollars
*** Non-financial incentive: whether a payment scale is included
and the extent to which it is used as a professional recognition.
**** School Autonomy: Flexibility of incentive design at school
level
Similarities to PRP (1999-)
• Student outcomes are (completely or partly)
based on nation-wide exam graded by
external independent examiners.
3. Non-financial incentives. The combination of financial and nonfinancial incentives reinforce teachers’ efforts. They also can mitigate
deviations from effective teaching, as suggested by the multitasking
model;
4. The extent of negative impacts. There are possibilities that teachers
respond strategically by shifting efforts from effective teaching to other
behaviours (e.g., cheating, teaching to test). However, such evidence was
rarely found or examined in these studies.
• Empower school with greater autonomy. Allow for more flexible
criteria setting to meet local needs with authority guidance to avoid a
complete decentralisation as in the case of Sweden;
• Extend pure payment scale to a ‘career ladder’. as in the case of
Tennessee to integrate non-financial incentives with financial incentives
and therefore induce more effort and reduce distortion on behaviours;
• Introduce fixed budget for rewards at school level. Place a limit on the
number of teacher receiving reward;
• Introduce relative performance pay. Enable faster pay progression for
teachers with higher rankings;
• Provide trainings and follow-up checks for reliability. Ensure the quality
of principal’s judgment on subjective performance measure and prevent
corruption if the extra costs associated are bearable;
Ingeneral,despitetheheterogeneityinincentivedesign,
rewards,measurementandcountry-specificcharacteristics, • Extend the pay progression to all teachers within Main Pay Scale.
Abolish incremental progression by seniority and allow for progression
weshouldhavesufficientevidencetobelievethereareat
at various speed to avoid a general pay rise for all teachers.
leastnon-negativeneteffectsofPRPonstudentperformance.
Reference:
1: The ProgrammeforInternationalStudentAssessment (PISA)isaninternationaleducationstudylooking attheknowledgeandskills
ofa15-year-oldstudentsinMathematics,ReadingandScience.Sincetheassessmentisnotdirectlylinkedtoanynationalcurriculum,it
iswidely accepted asafairmeasureofhumancapital.
2. Figure explained and data source:
Fig.1 Diminishing improvement in U.K.’s student performance from 2003-2014. Source: DofE gov.uk.
3.Papers:
Multitaskingmodel:‘Theoptimaldesignofperformancepayineducation’;Neal2011
U.K. PRP (Atkinsonetal,2004,2009,MarsdenandBelfield,2007);
Case1:“CareerLadderEvaluationSystem”inTennessee,U.S.(‘Doesmeritpayrewardgoodteachers?Evidencefromarandomizedexperiment’DeeandKeys2004)
Case2:Randomised ExperimentinIsrael(‘Performance PayandTeacher’seffort,productivityand GradingEthics’Lavy 2009)
Case3:Teachers’remunerationsysteminSweden(‘OECDReviewsofEvaluation andAssessmentinEducation SWEDEN’Nusche,Halász,Looney, Santiago andShewbridge,2011
TeacherPolicyReformsinSweden: TheCaseofIndividualised Pay’ Strath,2004)