Compensation Matters: The Case of Teachers

The brief’s key findings are:

• Many public sector pension plans have recently cut pension benefits for new hires, thereby reducing compensation.

• The analysis looks at how such cutbacks could affect the quality of teachers.

• One proxy for teacher quality is the average SAT score at a teacher’s undergraduate institution.

• The analysis finds that school districts with higher wages and/or higher pensions are able to hire teachers from institutions with higher SAT scores.

• These results suggest that cutting compensation for new teachers is not costless, as it will likely reduce applicant quality.