Do We Pay Teachers Too Much?

“Teaching is the only major occupation of man for which we have not yet developed tools that make an average person capable of competence and performance.  In teaching we rely on the ‘naturals,’ the ones who somehow know how to teach.” – Peter Drucker

Over the past few years we have seen a number of states run into serious fiscal difficulties (the list is only going to grow). The need to save the sinking ship of state budgets has led a number of legislatures and governors to look for ways to cut teacher pay or benefits (usually the latter is a bigger savings). Because it’s a hot topic, it has given rise to any number of lunch table discussions about teacher pay and benefits, and the value of an education; which is likely what led me to this post.

As a general rule, when you say this or that profession is overpaid, you can expect a great deal of indignant backlash. People, by and large, take it as an assault on their value as human beings to imply that they are overpaid. To avoid poisoning the waters, let me make clear that we are going to discuss economic value not personal value. In this sense we can and will be much more clinical.

In a free market economy, prices are set by the ebb and flow of supply and demand, and millions of individual decisions by free people about what they value and how they choose to spend their resources. Each person, acting in full realization of their individual liberty, decides what they will and will not buy. When merchants see that they are not selling enough of a particular product to be profitable, they will either lower the price or stop producing it. Merchants, just like customers, are free to act in their own economic interests, and they will do so.

These millions of little decisions (the pre-eminent self-organizing system in human experience) are what set not only prices at the supermarket, but the wage that each person is able to attain. A person’s skills are very much like commodities on the shelf at Walmart, and businesses will pay for them when they feel it is in their best economic interest to do so. If they refuse to pay the person will be unemployed, and must either lower his price demands or gain different skills that he can sell for greater value.

Are these individual decisions of free men and women regarding freedom of economic association actually optimal? Probably not. We probably do not have perfect understanding of the true value of one thing or another. We do not have perfect grasp of the future implications of all our decisions, and therefore are bound to make suboptimal choices in our free market interactions. But, and this is a big BUT, they are probably close to optimal. That is, people may not know exactly what is the best deal for them at any given point in time, but they’re not clueless either. They know quite a bit more than they are given credit. (This too is a principal of self-organization; the individual agents may not know exactly what is best, but their interactions can still produce near-optimal behavior with rather amazing stability.)

Besides all that, there is a nice moral backdrop to self-determination. If people get to choose economic behaviors for themselves, then at least their rising of falling cannot be laid at anyone else’s feet.

In light of this, we must consider all salary questions in a free market as “value determined by the other.” That is, my economic worth as a teacher, engineer, or fire fighter is based solely on what others are willing to pay for my services. It is not a moral judgment on my value as a human being. Neither is it a perfect assessment of the value I bring to any given economic enterprise (only God Himself could determine that with impunity). It is, however, the value as determined by my fellow citizens, my economic partners. For me to say “I am underpaid” (again, in a free market context) is to say that the free men and women with whom I interact economically all have a misunderstanding of my true worth, they are all wrong, they are all mistaken. Even if this were correct, it is out of kilter for a man to successfully make such a claim – you may be right, but you cannot trample the unalienable freedom of others to rectify this supposed wrong. You are free to try to convince them of their error (and I do hope you try), but no more.

(And, let me remind the reader, that empirical evidence is all but indisputable: when economic freedom is increased, prosperity follows. The free market has been the greatest wealth-generating development mankind has ever known.)

OK, now that we’ve traveled down the “wealth of nations 101” path for a bit, let’s get back to the subject of teacher pay. First, I will lay out my presumptive answer to the lead question, and then hope to defend it (preferably with some whit and aplomb). “Do we pay teachers too much?” – maybe, or maybe not; it all depends. What is fairly certain is that we pay teachers the wrong way.

First, let me point out that in most states, public schools have a near monopoly on the purchase of teaching skills. Yes, there are private schools that compete, but public schools are much larger, and command the checkbook of the state and municipality – a devastating advantage to any hope of competition.

Next, let me point out that in most places, teacher pay is driven largely be seniority, and not much else. This is a union paradigm. There is little room for merit-pay to give the best teachers more money (or to fire the worst teachers – but that is a different subject).

Further, there is little room for subject-based pay. Whether we like it or not, the free market has determined that certain subject matter (usually math and science) is more valuable than others. Before you balk at the notion that history, or home economics, or physical education is not valuable; remember, we are talking about economic value as determined by the free market. Those things may well be valuable in some absolute, holistic sense – but if people are not willing to pay for someone to teach them those skills they are of little economic value (in a free market).

Let us consider, for a brief moment, the economic barriers to highly qualified math and science teaching. I work a technical profession with a number of mathematicians (like myself). Quite a few of them would have preferred teaching, but they could not stomach the lower pay it would imply. That is not to say that the pay for teachers is always low. In some places it is quite high. However, the entry level pay for a math or science professional is generally lower than the pay in industry. So, these people make freedom-based economic decisions to do something other than teach.

Could we rectify this? Maybe. But we would have to amp up salaries for all subjects, not just science. Further, because of the seniority-based scales mandated by union contracts, we would have to pay 30-year veterans obscene amounts just to get the right entry-level pay for science teachers. Can you imagine paying a 30-year veteran social studies teacher $220,000 a year just so we can pay an entry-level math teacher the kind of salary he can command on the open market (if he’s a good mathematician, that is)? The public just will not support making such ridiculous economic decisions – it’s our tax money.

So, I suggest that the issue is not the amount paid to teachers, but the way in which they are paid. Ultimately this is what happens when we stifle the free market. When we refuse to allow merit-pay, whether for seniority or subject-matter reasons, we create an economic imbalance that leads to greater inefficiency in the productive system. If we could fix that problem, then I suppose the rest would sort itself out in due course.

In closing, let me add that we need not lay any of these economic inefficiencies at the feet of the teachers themselves. There are plenty of good teachers out there, and I suspect they would love to see merit-pay — because they would prosper in such a system. American’s do value education, and are willing to pay significant sums to secure a good education for their children. Those skilled at teaching have nothing to fear from a free market – they have valuable skills. It’s the unionized, no-show types that want to maintain the status quo, because they can get paid a good wage for no real production. On this, the public and the quality teachers would certainly agree, giving us a great path to a solution … if we will only take it.

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