NCPA - National Center for Policy Analysis

Students Perform Better With Teachers Who Are Paid for Performance

March 18, 2011

According to the results of the 2009 Programme for International Student Assessment (PISA) tests, released in December 2010 by the Organization for Economic Cooperation and Development (OECD), the United States performed only at the international average in reading, and trailed 18 and 23 other countries in science and math, respectively.  Students in China's Shanghai province outscored everyone, says Ludger Woessmann, a professor of economics at the University of Munich.

The U.S. Department of Education has encouraged states to devise performance pay plans for teachers in the hope that such an intervention could have a significant impact on student performance.  But is there anything in the data the OECD has accumulated to give policymakers reason to believe that merit pay works?  Do the countries that pay teachers based on their performance score higher on PISA tests?  Based on a new analysis, the answer is yes, says Woessmann.

  • A little-used survey conducted by the OECD in 2005 makes it possible to identify the developed countries participating in PISA that appear to have some kind of performance pay plan.
  • Linking that information to a country's test performance, one finds that students in countries with performance pay perform at higher levels in math, science and reading.
  • Specifically, students in countries that permit teacher salaries to be adjusted for outstanding performance score approximately one-quarter of a standard deviation higher on the international math and reading tests, and about 15 percent higher on the science test, than students in countries without performance pay.
  • These findings are obtained after adjustments for levels of economic development across countries, student background characteristics and features of national school systems.

Source: Ludger Woessmann, "Merit Pay International," Education Next, Spring 2011.

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