Welcome to the Profit of Education website. Continuing the conversation begun in the book Profit of Education, we discuss the latest economic evidence on education reform.

Incentive pay

I am not the greatest fan of incentive pay for teachers. Higher pay for all teachers, yes; big bonuses for just a few teachers, not so much. Given that, I’m intrigued by a new report by  Victor Lavy about an incentive pay experiment in Israel that seems to have been a raving success.

The Israeli experiment, which Lavy helped design, offered incentive pay to grade 10 through 12 teachers in 49 schools. Bonuses depended on how well students did on exams compared to their predicted scores from a statistical model. Teachers were ranked according to how well their students performed compared to students of other teachers of the same subject in the same school. Winners received one-time bonuses ranging from $7,500 down to $1,750. This at a time when teacher salaries averaged around $30,000. Note these are potentially very large bonuses.

Lavy finds that a decade and a half later, students in the schools where bonuses were offered are earning 7 percent more than students who’d attended other schools.

Big deal? Yes, very big deal.

Suppose we run these numbers into an American context. U.S. labor earnings are around 6 trillion (which leaves out all sort of stuff that probably ought to be counted, so we’re going to get a low-ball estimate). 7 percent of 6 trillion is $420 billion a year.

What about the cost side? We don’t have numbers on the total cost of the bonuses in Israel. We do know they ranged from 25% to 6% of salary, and that not all teachers won a bonus at all. Let’s be outrageous and imagine that every teacher got a 25% bonus.

A very rough number is that in the U.S. we spend $250 billion on teacher salaries. 25% of that is $62.5 billion.

In other words, the payback is 7 to 1. Hmmm, once you account for not all that many teachers getting a 25% bonus the payback would seem to be more like 15 to 1. But even 7 to 1 is an extraordinarily high return.

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Paid to read?

So if you pay kids a little bit to read, do they learn to read better? And if so, which kids get the biggest boost? Jonathan Guryan, James Kim, and Kyung Park looked at an experimental summer program called Project READS. Elementary school students were randomly selected into one of three groups.

  • Get a book a week in the mail during the summer.
  • Get a book a week in the mail during the summer and get paid five bucks worth of goodies for each book read.
  • Get nothing. (Kids in the control group did receive books in the fall after the experiment ended.)

The first two groups each received 10 books over the summer. They did read more than the control group. If you include all books, not just the ones mailed, students in the first group read one more book than did the control group and the students in the incentivized group read two more books than the controls.

The authors also measured students motivation to read before the summer began. Then they asked whether more motivated students responded differently. The answer is yes. A one standard deviation increase in motivation led to about one more book being read in group one than among the control group and probably a somewhat greater difference for group 2 versus the controls, although the difference between the two estimates isn’t statistically significant.

So did the kids reading improve? Different measures give slightly different answers, but the basic answer is summed up by a quote from the authors.

…there was no measurable effect of Project READS, with or without incentives, on reading comprehension scores.

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Charter schools and property values

As anyone with kids who’s house-shopped lately can tell you, good schools raise property values–sometimes a lot. So one way to ask whether charter schools are good schools is to see whether the arrival of charter schools in a neighborhood raises local property values. A new paper, “Capitalization of Charter Schools into Residential Property Values,” does just that.

Using data from Los Angeles County between 2008 and 2011, the authors looked at the change in the number of charter schools close to a given neighborhood. Then they looked at whether housing prices in the neighborhood went up or down. The answer is that charters opening and closing did nothing to housing prices.

So does this prove that charter schools have a no effect on housing prices, and perhaps by inference are neither better nor worse than whatever schools local children would otherwise have attended? It’s certainly evidence in that direction, but allow me to offer two caveats.

  1. There’s good reason to believe some charters are very effective and others very much are not. One possibility is that the “charters have no effect” result is an average of some charters having pluses and others having minuses.
  2. I wonder how long it takes for a good school to establish a reputation strong enough to affect property values. The authors only had data for four years. It could be that it takes a lot longer than that for changes in schools to make a difference to property values.
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2 Responses to Charter schools and property values

  1. The evidence is probably more that good *students* raise property values.//Charter schools and property values http://t.co/KsQlhSwQZP

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School spending: part three

Let’s continue with Kirabo Jackson, Rucker Johnson, and Claudia Persico’s paper “The Effects of School Spending on Educational and Economic Outcomes.” In pure money terms, does increased school spending pay off well enough to make the extra spending worth the investment?

A quick back-of-the-envelope. The authors estimate that a 10% spending increase causes adult wages to rise 7.25%. U.S. GDP is about 17 trillion dollars. About 2/3rds of that is paid to labor. Let’s assume that having smarter workers increases labor income but not capital income or profits–even though returns to other factors probably will increase.

back of envelope

K-12 spending in the U.S. is $632 billion (ballpark only, as the official numbers run a few years behind.) 10 percent of that is $63 billion.

In other words, the payback is around 13 to 1.

All right, the economists in the audience will point out that since school spending happens now and the benefits arrive later that one has to discount for the time value of money. The authors did just that and find a cost benefit ratio more like 2 to 1.

Works for me.

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School spending: part two

More today from the Jackson/Johnson/Persico paper “The Effects of School Spending on Educational and Economic Outcomes.” The authors used court-ordered changes in school spending to parse out long-run effects of increases dollars. Probably the single most interesting result is the effect of spending on adult earnings. The authors give us a picture in which the vertical axis is effectively the change in adult wages in percentage terms. Moving to the right along the horizontal axis shows what happens to students who spent more time in school post-reform and so had a longer period in which to benefit from the higher spending.

Effect of School Spending 2

The two panels show results for low-income versus other children. In both panels,you can see there was no pre-court order trend. The eventual increase in wages for low-income kids when they grow up is enormous. The benefit for better-off kids is much smaller.

The research team backs up their graphs with statistical estimates. They estimate that a 10 percent increase in school spending increases adult wages for low-income children by 9.5 percent. The estimate for the better-off group is 4.3 percent, but this latter estimate isn’t very precise.

Bottom line: more school spending does seem to pay off in dollars-and-cents.

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3 Responses to School spending: part two

  1. @mpolikoff says:

    RT @MrPABruno: “They estimate a 10 percent increase in school spending increases adult wages for low-income children by 9.5 percent” http:/…

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School spending: part one

The received wisdom in the economics of education is that increased school spending does little or nothing to improve student outcomes. It’s not that more money couldn’t help in principle; rather the evidence has said that increased spending hasn’t paid off in practice. Evidence in a new paper, “The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms,” by Kirabo Jackson, Rucker Johnson, and Claudia Persico, may well change the profession’s beliefs about the effectiveness of spending more on schools.

Here’s what the research team did. First, they looked at the effect of school spending in cases where the spending changes came from court orders. What makes this different from past work is that the changes resulting from court orders are exogenous. Speaking a little loosely, the authors can effectively do a before-and-after comparison which controls for other events that might be coincident with changes in school spending and student outcomes.

Second, the authors looked at long-run results instead of looking at test scores. (The evidence seems to be accumulating that changes in test scores point in the right direction when evaluating policy, but that test score changes tend to understate long-run effects.) The authors then present their long-run evidence in two ways: visually as before-and-after pictures and then numerical results from careful statistical estimation.

The study has a number of findings (more coming on Wednesday). Here’s their picture on changes in years of education from a 10% increase in spending.

Effect of School Spending 1

The left panel shows the effect on low-income children, the right panel is for the remaining children in their sample. In each panel the dashed vertical line marks the point of a court-ordered reform. To the left of the dashed line (before reform), nothing’s going on. After the reform, there is a gradual increase in years of schooling for low-income children. The right hand side of the graph shows the effect on someone whose entire youth was in the higher-spending years. The effect on low-income children is large; for other children the effect is small. The author’s statistical estimates suggest that a 10 percent increase in school spending leads to just under half a year of additional school for low-income kids and effectively no change for the better-off group.

Or as the authors put it

the estimated effect of a 22.7 percent increase in per-pupil spending throughout all 12 school-age years for low-income children is large enough to eliminate the education gap between children from low-income and non-poor families

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3 Responses to School spending: part one

  1. RT @MrPABruno: “evidence seems to be accumulating that test scores point in the right direction, but understate long-run effects” http://t.…

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Dan Goldhaber and me in the Los Angeles Times

LA Times op-ed

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More on teacher experience

Today, another piece of evidence that teachers continue to get better with experience. Helen Ladd and Lucy Sorensen offer new findings, based on middle school teachers in North Carolina, suggesting that learning-on-the-job continues for an extended period, perhaps a decade or so.

Ladd and Sorensen put together a graph of math results for teachers of different levels of experience.

Ladd math experienceYou can see that more experienced teachers produce bigger gains. What’s new is that the gains seem to keep getting better at least to 7 or 8 years and maybe for a good bit longer. The estimates still suggest the biggest gain comes after a single year of experience with a further big gain in the second year. Something like half the gain from experience happens in those first two years, but that still means that teachers continue to improve gradually for another decade or more.

By the way, Ladd and Sorensen find the pattern is similar in teaching reading, although less dramatic.

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5 Responses to More on teacher experience

  1. @PPTAWeb says:

    Greater teacher experience correlated with improved student outcomes http://t.co/C4fyiN6zH2 via @ProfitOfEd http://t.co/vFlHuPLxnp

  2. @MrPABruno says:

    “teachers continue to improve gradually for another decade or more” http://t.co/6o2ZlbYVn5

  3. @ProfitOfEd says:

    More on teacher experience: Today, another piece of evidence that teachers continue to get better with experienc… http://t.co/ZpzrbasiN4

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Changing views on teacher experience

Matt Wiswall has a nice Bill Gates’ quote about teacher experience.

Once somebody has taught for three years their teaching quality does not change thereafter.

That quote is a pretty fair representation of what past research has shown. Well, maybe gains continue for five years, but not more than that. (We’re talking averages, of course. Some teachers do continue to get better for many years and some burnout.) Wiswall gives us a picture of what other researchers have found.

Wiswall 1

You can see that three studies show no gains after three to five years. Two studies do show gains continuing for a while longer, but then flattening out.

Wiswall took data on essentially every fifth grade public school teacher in North Carolina and estimated a very flexible relation between student outcomes and experience. Here’s Wiswall’s picture from his own research.

Wiswall 2

What’s different is that Wiswall’s estimates suggest that teachers do, on average, keep getting better throughout their career.

Very different from the received wisdom. More recent evidence on teacher experience next time.

m4s0n501
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9 Responses to Changing views on teacher experience

  1. @NShrubs says:

    RT @MrPABruno: Changing views on teacher experience http://t.co/5iIwAukHIb

  2. @symphily says:

    RT @MrPABruno: Changing views on teacher experience http://t.co/5iIwAukHIb

  3. @jelmerevers says:

    Interesting, but what outcomes? “softer” side definitely growth “@MrPABruno: Changing views on teacher experience http://t.co/IWtqspDXNt”

  4. @ProfitOfEd says:

    Changing views on teacher experience: Matt Wiswall has a nice Bill Gates’ quote about teacher experience.
    Once … http://t.co/c3GOTS6Swh

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Earnings of teachers and others

If it’s Friday, it must be time to look once again at teacher salaries. Teaching is a particularly tough job that requires a good deal of talent. In order to attract enough great teachers, pay rates should be somewhere above the average pay for college graduates. How much higher is hard to say, but certainly higher.

I’ve made a new comparison of teacher income to income in other professions. Using the most recent Current Population Survey, I extracted a sample of college graduates working full-time in each state. Then I found the median wage and salary income for separately for teachers and non-teachers. This map shows teacher earnings relative to non-teachers, where “100” means teachers have the same wage and salary income as non-teachers.

relativeTeacherSalaryIncome

With the exception of Montana, teachers earn less than other college grads–often much less. Now it’s true that teaching comes with some extra benefits. Fringe benefits are certainly higher than in most other jobs and the joy of making a difference for kids is what keeps in school many of the great teachers we do have. But we aren’t attracting enough of the best and brightest. Every state on my map ought to be whatever color is brighter than yellow.

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7 Responses to Earnings of teachers and others

  1. RT @NCTQ: ICYMI: @ProfitOfEd map on #teacher salaries vs. median college grads. #notaprettypicture http://t.co/hwwnfR0ReF http://t.co/IjUHL…

  2. @jwalnuth says:

    RT @NCTQ: ICYMI: @ProfitOfEd map on #teacher salaries vs. median college grads. #notaprettypicture http://t.co/hwwnfR0ReF http://t.co/IjUHL…

  3. RT @NCTQ: ICYMI: @ProfitOfEd map on #teacher salaries vs. median college grads. #notaprettypicture http://t.co/hwwnfR0ReF http://t.co/IjUHL…

  4. @MrPABruno says:

    So the only state in which teachers earn more than other college-educated workers is Montana? http://t.co/msr8GBqiVf

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