Of the many disputes that have frozen contract talks between City Hall and the teachers union, one of the bitterest is merit pay—rewarding individual teachers not for seniority, but for what they achieve in the classroom. Mayor Giuliani has demanded that merit pay be part of any deal, but the teachers resist. The mayor is right to stick to his guns.
To get a sense of what merit pay could do for schools, consider the benefits for industry. In the early '80s, U.S. companies, desperate to regain their edge against international competition, began to experiment with measuring individual worker performance and establishing pay incentives to improve formerly hard-to-measure categories like customer service.
Retailers hired mystery shoppers to check how employees treated customers; businesses began to gauge not just how many widgets employees sold, but how long clients stuck with them, and so on. At first, workers grumbled. But firms won them over, and by the mid-1990s, half of major U.S. corporations used such incentives. Merit pay helped generate productivity gains and better-quality merchandise.
Still, the public education monopoly resisted merit pay on the grounds that any attempt to pin down exactly what makes for good teaching, let alone reward it fairly, is doomed to fail. Some educators even argued that factors outside school, especially a student's socioeconomic status, had a much greater impact on student performance than teachers.
Over the last decade, these views have collapsed, in part because of the work of former University of Tennessee Prof. William Sanders, who developed a sophisticated statistical method for measuring a teacher's effect on student performance. It demonstrated what every parent already knew: Not only do teachers matter, but some are lots better than others. Other experts developed criteria to judge good teaching that laid to rest the absurd notion that it is too elusive to define.
If the 1990s helped reestablish the centrality of teaching in the education debate, however, that victory hasn't melted away union opposition to merit pay. Even so, a small number of school systems across the country have turned to it. Cincinnati persuaded its teachers in 1997 to do a test run of merit pay. Two years later, a 10-school pilot program got underway. Essential to union support was the use of teacher evaluators, or peers, who joined with principals to assess teachers.
A majority of teachers involved found the test program fair and the standards used as appropriate for the whole school district. The board of education adopted it in spring 2000, and union members signed on.
One major benefit of merit systems is that they enable schools to pay teachers—especially young, ambitious ones—fatter salaries. That's the rationale behind a new merit pay program in Iowa. Good teachers will now be able to reach higher salary levels earlier in their careers. Iowa enacted the system specifically to help it retain good teachers.
Experiences from the private sector suggest it will take several years before the kinks are worked out of these imaginative programs. In the meantime, critics will pounce on every mistake as evidence that paying teachers for performance is a bad idea. And unions are likely to push for watered-down plans to deflect criticism without giving up too much.
This is exactly what's happening in New York. The union has offered a compromise: Pay every teacher a bonus if the school's test scores rise. But group bonuses will never substitute for true performance pay, since they don't single out good and bad teachers. And because schoolwide bonuses don't put any pay at risk—poor performance doesn't mean less money—they won't help rid schools of lousy teachers.
Without individual merit pay, teacher evaluations remain perfunctory at best. Today, New York principals fail less than 1% of teachers in annual evaluations.
Until teachers are part of a performance-pay system, students will continue to get shortchanged, regardless of how much their teachers take to the bank.
Malanga is a contributing editor of City Journal.