Of Course Merit Pay Is a Good Idea

Time for public schools to catch on

In almost every profession, workers are compensated based on how much value their employers think they bring to the company. Of course, the workers generally want more money and the employers want to pay less, but something of equilibrium is reached, which is how the market determines wages.

That's merit pay, and outside of conventional public schools, it is almost entirely uncontroversial.

But defenders of the public school status quo in Michigan believe that compensation for teachers should be paid based on two things: Degree level and longevity. They believe that the effectiveness of a teacher is too hard to measure and should not be attempted.

House Bill 4625, which recently passed through committee, would change that. According to, it would, "require that the 'primary factor' in setting compensation levels for all new public school teachers and administrators must be 'job performance and job accomplishments' as determined by a 'rigorous, transparent, and fair evaluation system primarily based upon student growth data as measured by...objective criteria.' Setting pay on the basis of seniority would be prohibited, and setting it on the basis of academic credentials would be restricted."

The critics of the legislation argue that experience matters, which is true. That's why, in general, employees with more experience in the private sector have higher salaries. The workers with more seniority tend to be better at the job they are doing.

But that’s not a universal truth, which is why private-sector employees don't mandate compensation based only upon seniority. If they did, talented younger workers would go and work somewhere else while older employees would have less of an incentive to keep pace with new workers.

It may be true that this bill is too prescriptive and there are better ways to measure teachers. But if so, critics should put forth those examples, rather than defending a system that ignores skills when compensating employees.

The main obstacle to merit pay is teachers' unions. On its website, the National Education Association (parent-group to the Michigan Education Association) calls for a "short and strong salary schedule, with a minimum of $40,000 annual pay for teachers," arguing that compensation based only on degree level and longevity is the most "fair."

The union also fights against compensating different areas of education differently — say qualified high school science and math teachers (who are harder to find) vs. physical education or English teachers (where applicants can number in the hundreds per job).

Ironically, calling for the salary minimum and annual increases contradicts the union's stance against merit pay. If merit pay truly doesn't work — that is, that teachers don't respond to incentives to improve their performance — then why have a minimum salary? If teachers won't respond to incentives for more money through merit pay, why does the union think they'll respond to more money through a minimum salary?

Single-salary schedules are rarely found in the private sector, and for good reason. Like all employees, teachers should be compensated based on how well they do their jobs and the value they provide their schools and districts. Those fighting that change should instead pursue ways to spend the most money on the best teachers.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.