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Targeting Teachers Pay

ADMN 2916
Submitted By: Scott Thornton
Submitted To: Professor Gordon
Date: October 15, 2014

Table of Contents

Introduction to the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3


Knowledge Based Pay Systems versus Person Based Pay Systems . . . . . . . . . . . . . . 4

A. Define Knowledge Based Pay Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B. Define Person Based Pay Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Which System is Most Appropriate? Why? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


The Differential Effects/Impacts on Teacher Motivation and Costs . . . . . . . . . . . . . . 6

A. Salary Differentials and Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Salary Differential Impact on School Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


Seniority versus Increased Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8


Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


Introduction to the Case

This case exemplifies the difficulties in determining the appropriate compensation structures for
teachers. More specifically it questions the fairness and ability to effectively motivate teachers
with the current compensation structure that is most prevalent in the teaching industry. The
current structure can be described as a hybrid between a knowledge-based pay system and
person-based pay system. Teachers receive pay increases based on their years of service up to a
maximum of ten years, as well as their level of education. This pay structure has many
criticisms, many of which relate to its inability to accurately link the performance of teachers to
their pay. It also has the potential to create internal conflict between teachers due to the fact that
two different teachers can earn significantly different salaries while performing essentially the
same jobs. One high school teacher described the current pay system as one in which
excellence goes unrewarded, mediocrity goes unaddressed (Globe and Mail 3). This type of
pay system dates back about 80 years and has remained relatively untouched since that time due
to its simplicity and objectivity (Hassel, 2002). The fact that this system is still widely used
today mostly due to its simplicity is not a good enough reason for policy makers to not seek
alternatives that could improve the educational system as a whole. A lot has changed in the past
80 years and it is time to seriously re-evaluate the way teachers are paid to ensure the most
effective method is being used.


Knowledge versus Person-Based Pay Systems

A. Define Knowledge-Based Pay Systems

Knowledge-based pay systems can be defined as rewarding employees based on them taking the
initiative to acquire new knowledge that will increase their performance in their jobs (Odden,
2001). Whether or not the newly acquired knowledge will actually translate into increased
performance depends on the companys ability to link the knowledge to increased performance.
This type of system works well in the manufacturing industry because it is easy to measure the
increase in output from workers after their newly acquired knowledge. In the teaching
profession, earnings are based primarily on input (that is, skills and time worked), rather than on
output (Lavy, 2007, p. 88). The increased performance of teachers, assuming there is any, is
difficult to measure because it cannot be done objectively by measuring an increase in output
numerically, as it can in manufacturing jobs.

B. Define Person-Based Pay Systems

Person-Based pay systems have two different methods or models that can be applied in the
workplace. Skill-based pay structures focus more on learning specific skills that can then be
applied on the job, and usually involve some sort of certification process. This structure rewards
employees either based on their depth of knowledge in one specific area, or on their range of
knowledge in multiple different areas (Cole, Milkovich, Newman, & Yap, 2013). Skill-based
payment plans are more commonly used in blue-collar, manufacturing type jobs where the work
can be measured objectively.

Competency-based structures pay employees based on their knowledge, skills, abilities, and
behaviours, which can be universally applied to any position (Cole et al., 2013). This method
does not reward based on formal knowledge, but rather looks to assess employees on their
proficiency in specific areas such as communication. Employees can demonstrate their level of
proficiency in a given area based on their background and previous work experiences. The
competencies can be assessed and rated using competency indicators, which are observable
behaviours that demonstrate the employees level of competence in that area (Cole et al., 2013).
Employees are then compensated based on the degree to which they are able to effectively
demonstrate the competencies that are important to the employer. The competency-based pay
structure applies more to white-collar jobs where the focus is not on manual labour but rather
applying ones knowledge and abilities in order to do their jobs.

C. Which System is Most Appropriate?

Person-based competency pay systems are more appropriate for the teaching profession due to
the fact that schools can compensate teachers based on the competencies they feel are most
important to optimize students learning. In the knowledge-based system, a level two teacher
with a bachelors degree may out-perform a level four teacher with a doctorate degree, but will
still be paid lower simply due to their lower formal education. This system does not place any
merit to the application of competencies or increased education to the job itself. It simply
rewards teachers for obtaining additional degrees, even if it has no positive effect on their
students academic success (Hassel, 2002). Another advantage of the competency-based pay
structure is that individual schools can reward teachers for specific competencies that they feel
are most important to their school and students. For example, if a school identifies that it is
having difficulty at engaging special needs students in the classroom, a teacher whom

exemplifies excellent communication and student engagement skills would be compensated at a

higher rate than one who cannot display these competencies at such a high degree. It therefore
has more flexibility in compensating teachers based on the actual needs of the school and its


The Differential Effects/Impacts on Teacher Motivation & Costs

A. Salary Differentials and Motivation

The current compensation structure used for teachers is designed to motivate teachers both to
remain a teacher via increased pay for years of service, as well as furthering their education via
pay increases for additional degrees (Lavy, 2007). In theory it sounds it sounds both simplistic
and effective as a retention and continuous improvement strategy. However, it has its flaws
when looked at more in depth from individual teachers perspectives. For younger teachers in
their 20s or 30s, this system can be quite motivating. They are still far from retiring so they will
be more motivated to increase their education to benefit from the resulting pay increase which
will last the duration of their career. Older teachers who are in their last five years of teaching
before retirement may not find this system as motivating as their younger counterparts. They
would only be able to benefit from increased education for the few years they have left until
retirement, which may only result in them breaking even from the pay increase when you factor
in the costs and effort spent to get a higher degree.
Another factor to consider is that the majority of households have dual-incomes, with both
spouses actively in the workforce. This creates two problems. First, by having two sources of
income, many families do not feel the need to acquire the highest level of education to maximize
their compensation, since they can live comfortably by simply working their way down the

seniority ladder. Secondly, work-life balance is becoming ever more important, especially with
the younger generations. Furthering education is a very time consuming process requiring
significant effort and dedication, so teachers may not see the value in doing so, and would rather
allocate that time and effort towards their families.
The pay grid also appears to have a significantly larger pay increase between level two and level
three. At ten years experience, the pay increase between level one and two is only about $3,000.
After that, the increase from level two to three is just over $10,000, and the increase from level
three to four is only $5,000. Therefore many teachers may see the value in increasing their
education up to level three, but after that the effort it takes to obtain a doctorate to become a level
four teacher may not be worth the pay increase of only $5,000. One exception to this would be if
a teacher had the career aspirations to become a principal or an executive on the school board. It
is likely that these types of positions require a masters or doctorate so in these cases, it would
justify their choice to increase their education.

B. Salary Differential Impact on School Costs

This type of compensation structure is used primarily for budgeting and forecasting purposes due
to its relative simplicity. School boards only have a finite amount of financial resources to
allocate across the schools they serve so these incremental steps or pay bumps make it
relatively straightforward to calculate how much money they will need to cover teacher wages
for upcoming school years. The school boards will know that every teacher who is staying for
another year will get their respective pay increase for years of service, assuming they are not
already maxed out. Therefore the only variable they would need to worry about is how many
teachers are pursuing further education in order to receive a pay increase in a horizontal fashion
on the teachers pay scale.


Seniority versus Increased Education

The argument for the current pay structure that is in place is that schools are rewarding
experience and higher education, which, in turn is rewarding higher-quality teaching. However,
research indicates that a teachers experience and level of education is weakly related to their
effectiveness at teaching children at best (Hassel, 2002). A teacher could have over 30 years
experience with a doctorate degree, but if they simply stand at the front of a classroom reading
material out of the textbook without engaging their students, it will not lead to improved
performance of students as this pay structure suggests it should. One research paper indicated
that only three percent of contributions teachers make to student learning are related to their
experience and level of education. The other 97 percent is comprised of teacher qualities and
behaviours that cannot be objectively identified or measured (Hassel, 2002). The only real
benefit to the current pay structure is that it is easier and cheaper for administrative workers to
administer. If school boards were to for example implement a new compensation system that
rewards teachers based on evaluations on their effectiveness in the classroom, it would costs a
significant amount more due to the time and money required to evaluate each and every teacher
in the school board. Therefore this pay structure has no real benefits to students since there will
always be teachers who put the minimum effort into teaching, knowing that it really does not
matter because they will get their pay increase regardless of the quality of teaching they perform.



One alternative to the existing pay structure that is used is to compensate teachers based on 360
degree evaluations. This would involve paying teachers a base salary that would only increase in
relation to inflation or the consumer price index in order to adjust for the cost of living, as well as
using financial incentives or bonuses on top of that based on teacher evaluations. These
evaluations would be conducted by students, parents, principals, and fellow teachers (Lavy,
2007). The school boards would set aside a predetermined amount of money to reward teachers
proportionately to the evaluation criteria agreed upon by school board executives. This would
give an incentive for teachers to put more effort into their teaching and also allow the evaluators
to identify ineffective teachers who either need more training to improve or need to be
terminated. This type of compensation model would be more costly than the existing structure
however, and would require hiring additional administrative workers to schedule and keep track
of the evaluations. It also has the possibility of creating internal conflict between teachers if one
teacher feels they do a better job than another yet is not rewarded as such. Agency issues are
another concern since principals and other teacher may have pre-existing notions or feelings
toward the teachers who they are evaluating. There are many issues and areas that would need to
be worked out, but in terms of actually compensating teachers for the level of quality teaching
they deliver to their students, this model would be much more effective.



In conclusion, the compensation structure currently used in the teaching profession is both
outdated and ineffective. It rewards teachers based on years of experience and level of education
attained, both of which are poor indicators of quality teaching and student achievement. This


structure is most likely still in use because of budgeting purposes and ease of administration. If
school boards would like to reward their teachers in relation to the actual quality of teaching and
effort put into ensuring student success, they would be better off using a variable pay structure.
This would involve using both subjective and objective criteria to determine the level of
compensation individual teachers receive in order to effectively motivate them to improve their
teaching methods and in turn the success of their students.


VII. References
Alphonso, C. (2014, January 23). Teacher's pay should be based on performance, not years worked:
Report. Retrieved October 10, 2014, from
Hassel, B. (2002). Better Pay for Better Teaching: Making Teaching Comensation Pay Off in the Age of
Accountability. Progressive Policy Institute. Retrieved October 10, 2014, from
Lavy, V. (2007). Using Performance-Based Pay to Improve the Quality of Teachers. 17. Retrieved October
10, 2014, from http://www.jstor.org/stable/pdfplus/4150021.pdf?acceptTC=true&jpdConfirm=true
Milkovich, G., Newman, J., Cole, N., & Yap, M. (2013). Compensation (4th ed.). McGraw-Hill Ryerson
Odden, A. (2001). Enhancing Teacher Quality through Knowledge and Skills-Based Pay. Consortium for
Policy Research in Education. Retrieved October 10, 2014, from