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Resources That Matter

The premise that money matters for improving school quality is grounded in the assumption that having more money provides schools and districts the opportunity to improve the qualities and quantities of real resources. The primary resources involved in the production of schooling outcomes are human resources—the quantity and quality of teachers, administrators, support, and other staff in schools. Quantities of school staff are reflected in pupil-to-teacher ratios and average class sizes. Reduction of class sizes or reductions of overall pupil-to-staff ratios require additional staff, and thus additional money, assuming wages and benefits for additional staff remain constant. Quality of school staff depend in part on the compensation available to recruit and retain them—specifically salaries and benefits, in addition to working conditions. Notably, working conditions may be reflected in part through measures of workload, like average class sizes, as well as the composition of the student population.

A substantial body of literature has accumulated to validate the conclusion that both teachers' overall and relative wages affect the quality of those who choose to enter the teaching profession, and whether they stay once they get in. For example, Murnane and Olsen (1989) found that salaries affect the decision to enter teaching and the duration of the teaching career, while Figlio (1997, 2002) and Ferguson (1991) concluded that higher salaries are associated with more qualified teachers. Loeb and Page (2000) tackled the specific issues of relative pay noted above. They showed that:

Once we adjust for labor market factors, we estimate that raising teacher wages by 10 % reduces high school dropout rates by 3–4 %. Our findings suggest that previous studies have failed to produce robust estimates because they lack adequate controls for non-wage aspects of teaching and market differences in alternative occupational opportunities.

In short, while salaries are not the only factor involved, they do affect the quality of the teaching workforce, which in turn affects student outcomes.

Research on the flip side of this issue—evaluating spending constraints or reductions—reveals the potential harm to teaching quality that flows from leveling down or reducing spending. For example, Figlio and Rueben (2001) note that, “Using data from the National Center for Education Statistics we find that tax limits systematically reduce the average quality of education majors, as well as new public school teachers in states that have passed these limits.”

Salaries also play a potentially important role in improving the equity of student outcomes. While several studies show that higher salaries relative to labor market norms can draw higher quality candidates into teaching, the evidence also indicates that relative teacher salaries across schools and districts may influence the distribution of teaching quality. For example, Ondrich et al. (2008) “find that teachers in districts with higher salaries relative to non-teaching salaries in the same county are less likely to leave teaching and that a teacher is less likely to change districts when he or she teaches in a district near the top of the teacher salary distribution in that county.”

Others have argued that the dominant structure of teacher compensation, which ties salary growth to years of experience and degrees obtained, is problematic because of weak correlations with student achievement gains, creating inefficiencies that negate the relationship between school spending and quality (Hanushek 2011). Existing funds, they argue, instead could be used to compensate teachers according to (measures of) their effectiveness while dismissing high-cost “ineffective” teachers and replacing them with better ones, thus achieving better outcomes with the same or less money (Hanushek 2009).

This argument depends on four large assumptions. First, adopting a pay-forperformance model, rather than a step-and-lane salary model, would dramatically improve performance at the same or less expense. Second, shedding the “bottom 5 % of teachers” according to statistical estimates of their “effectiveness” can lead to dramatic improvements at equal or lower expense. Third, it assumes there are sufficiently accurate measures of teaching effectiveness across settings and children. Finally, this argument ignores the initial sorting of teachers into schools where more marketable teachers head for more desirable settings.

Existing studies of pay-for-performance compensation models fail to provide empirical support for this argument—either that these alternatives can substantially boost outcomes, or that they can do so at equal or lower total salary expense (Springer et al. 2011). Simulations purporting to validate the long-run benefits of deselecting “bad” teachers depend on the average pool of replacements lining up to take those jobs being substantively better than those who were let go (average replacing “bad”). Simulations promoting the benefits of “bad teacher” deselection assume this to be true, without empirical basis, and without consideration for potential labor market consequences of the deselection policy itself (Baker et al. 2013a). Finally, existing measures of teacher “effectiveness” fall well short of these demands (Ibid.).

Most importantly, arguments about the structure of teacher compensation miss the bigger point—the average level of compensation matters with respect to the average quality of the teacher labor force. To whatever degree teacher pay matters in attracting good people into the profession and keeping them around, it's less about how they are paid than how much. Furthermore, the average salaries of the teaching profession, with respect to other labor market opportunities, can substantively affect the quality of entrants to the teaching profession, applicants to preparation programs, and student outcomes. Diminishing resources for schools can constrain salaries and reduce the quality of the labor supply. Further, salary differentials between schools and districts might help to recruit or retain teachers in highneed settings. So, too, does investment in improved working conditions, from infrastructure to smaller class sizes and total student loads. In other words, resources for teacher quality matter.

Ample research indicates that children in smaller classes achieve better outcomes, both academic and otherwise, and that class-size reduction can be an effective strategy for closing racial or socioeconomic achievement gaps (U.S. Department of Education et al. 2003). While it's certainly plausible that other uses of the same money might be equally or even more effective, there is little evidence to support this. For example, while we are quite confident that higher teacher salaries may lead to increases in the quality of applicants to the teaching profession and increases in student outcomes, we do not know whether the same money spent toward salary increases would achieve better or worse outcomes if it were spent toward class size reduction. Some have raised concerns that large-scale class-size reductions can lead to unintended labor market consequences that offset some of the gains attributable to class-size reduction (such as the inability to recruit enough fully qualified teachers). For example, studies of California's statewide class-size reduction initiative suggest that as districts across the socioeconomic spectrum reduced class sizes, fewer high-quality teachers were available in high-poverty settings (Jepsen and Rivkin 2002). [1]

While it would be useful to have more precise cost-benefit analyses regarding the tradeoffs between applying funding to class-size reduction versus increased compensation (Ehrenberg et al. 2001), the preponderance of existing evidence suggests that the additional resources expended on class-size reductions do produce positive effects. Both reductions to class sizes and improvements to competitive wages can yield improved outcomes, but the gains in efficiency of choosing one strategy over the other are unclear, and local public school districts rarely have complete flexibility to make tradeoffs because class-size reduction may be constrained by available classrooms (Baker and Welner 2012). Smaller class sizes and reduced total student loads are a relevant working condition simultaneously influencing teacher recruitment and retention (Loeb et al. 2005; Isenberg 2010). That is, providing smaller classes may partly offset the need for higher wages for recruiting or retaining teachers. High-poverty schools require both strategies rather than an either-or proposition when it comes to smaller classes and competitive wages.

As discussed above, achieving equal educational opportunity requires leveraging additional real resources—lower class sizes and more intensive support services— in high-need settings. Merely achieving equal-quality real resources, including equally qualified teachers, likely requires higher competitive wages, not merely equal pay in a given labor market. As such, higher-need settings may require substantially greater financial inputs than lower-need settings. Lacking sufficient financial inputs to do both, districts must choose one or the other. In some cases, higher need districts may lack sufficient resources to reduce class sizes or provide more intensive support.

Fig. 4.1 Conceptual map of fiscal inputs & real resources

In this chapter, we explore the relationship between financial inputs and these tradeoffs, both within and across states, and over time. Specifically, we address the following questions:

• What patterns in national and state funding equity and adequacy do we see over the last two decades?

• What patterns do we find in access to important school resources, namely wage competitiveness and staffing ratios, over the same time period?

• What is the relationship between the adequacy and equity of school funding and access to real resources (teacher wages, staffing ratios, and class sizes)?

  • [1] “The results show that, all else equal, smaller classes raise third-grade mathematics and reading achievement, particularly for lower-income students. However, the expansion of the teaching force required to staff the additional classrooms appears to have led to a deterioration in average teacher quality in schools serving a predominantly Black student body. This deterioration partially or, in some cases, fully offset the benefits of smaller classes, demonstrating the importance of considering all implications of any policy change” (p. 1). For further discussion of the complexities of evaluating class size reduction in a dynamic policy context, see Sims 2008, 2009; Chingos 2010.
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