Merit Pay - Effort Versus Selection

Effort Versus Selection

Most analyses of merit pay, including the Nashville Study, consider whether or not the existing teachers in a school perform better after being offered pay for performance. Scores might go up if teachers work harder or "work better." This situation, often called "increased effort," implies that teachers were not working as hard as they might before the performance pay was offered, and the lack of achievement results implies that the performance pay does not lead to increased effort. On the other hand, an additional feature of performance pay might be improved "selection" of who enters and who stays in teaching. For example, a different group of teachers might be induced to enter the teacher profession if pay was aligned more with performance. And, the best teachers, the ones who get the added performance pay, may on average be induced to stay in the classroom longer. These larger impacts through changes in selection would not show up on the evaluations previously conducted but can show up on overall comparisons of countries that do and do not employ performance pay systems. Ludger Woessmann finds evidence that performance pay does improve performance when viewed across countries. Additionally, the analysis of the impact of dismissing ineffective teachers by Eric Hanushek can be interpreted as a special form of performance pay where pay is reduced to zero (or a very low amount) for teachers who do not perform well.