Teachers affect student academic achievement more than any other school-based factor. As a result, states and school districts have experimented with incentive pay programs as a twofold strategy to both attract high-quality teachers and boost student performance. Evidence on the effectiveness of this tactic is mixed, but the policies can differ greatly in structure, and little is known about how the design of incentive plans might impact their effectiveness.
Enter a new National Bureau of Economic Research (NBER) study that examines the structure of Houston’s recently implemented incentive pay system, as well as its effect on student achievement.
The researchers analyzed data from grades 3–8 from the Houston Independent School District’s (HISD) merit pay system, ASPIRE (“Accelerating Student Progress, Increasing Results and Expectations”). ASPIRE is designed as a “rank-order tournament,” which rewards top-performing math, reading, language arts, science, and social studies teachers based on their value-added scores (estimates of the effect individual teachers have on student learning over a school year). Under ASPIRE, teachers receive a $3,870 bonus if their students receive value-added scores above the fiftieth percentile; scores above the seventy-fifth percentile result in even larger bumps—up to $7,700 per teacher.
The authors initially hypothesized that teachers who are aware that they are close to the bonus threshold had stronger incentives to improve than those further away from the cut-off. Surprisingly, however, the study finds that teachers did not respond to ASPIRE’s incentives in this manner. Overwhelmingly, teachers near the award threshold one year did not see growth in student performance the following year. The only exception was for science teachers, where the observed effect was positive but extremely small.
The authors offer a few possible explanations for this curveball. First, teachers may already be “giving it their all” in the classroom and simply cannot put forth any extra effort. Or they may lack the necessary tools and knowledge to drive student achievement further. They conclude, however, that the most likely reason ASPIRE’s incentive pay failed to drive improvement in student test scores was that there is too much “noise” in value-added estimates (which can fluctuate greatly from year to year). In short, teachers did not have a basis to inform their effort decisions because they lacked a reliable measure of their ability.
From a policy standpoint, the study reveals a glaring weakness in merit pay systems. It suggests that for teacher-based incentive programs to work, they must offer sizable bonuses, be easy for teachers to understand, and be based on reliable and transparent measures of teacher ability.
SOURCE: Margaret Brehm et al., “Achievement Effects of Individual Performance Incentives in a Teacher Merit Pay Tournament,” National Bureau of Economic Research, Working Paper No. 21598 (September 2015).
