Our best teachers are worth $130,000 per annum

The Business Council of Australia is to present the government with a radical proposal under which Australia’s best teachers would be paid up to $130,00 each in order to remain in the classroom.

At the moment the top salary for a classroom teacher is around $70,000.

The proposal, outlined in a paper released this morning entitled Teaching Talent: The Best Teachers For Australia’s Classrooms, would eventually cost an extra $4 billion per year, to be funded half by the Commonwealth and half by the states and territories.

Justifying the expense the Business Council paper says there are “no cost-neutral ways to ensure that in the future Australia will have a teaching profession equal to the best in the world”.

“But there will be major costs if we do not"...

The Council proposes setting up a new national agency to run a voluntary advanced certification system for teachers.

Those judged to be “Accomplished Teachers” would be rewarded with a salary twice the graduate starting level.

Those judged to be “Leading Teachers” would receive 2.5 times the starting salary.

The certification agency would be run by teachers themselves.

Certification would be required in order for teachers to be promoted to leadership positions.

The Business Council report says that “salary may not be a strong reason why current teachers have chosen to teach, but it is a strong reason why many abler graduates choose not to teach, and this is cause for considerable concern if we want our education system to remain among the
best in the world”.

“There is no justification for assuming from this that our society can continue to get away with not paying teachers what they are worth,” the report says.

The report finds evidence of a “a largely hidden
resignation spike” after eight to ten years of teaching, when teachers reach the top of their salary scales.

“For some teachers, this may be a case of ‘now or never’ when it comes to seeking a new career, a decision that crystallises when teachers reach the maximum and final salary step.”

The report says good teachers are often being replaced by new teachers of a lesser academic quality.

Universities have been dropping their entrance requirements and were “free to enrol students in teacher education courses until they fill course quotas”.

In some courses the entry level is less than the 60th percentile, “which means Australia is recruiting substantial numbers of primary teachers from the middle third of high school graduates rather than the top third,” the report says.

Most states do not require students taking up teacher training to have passed either Year 12 maths or science.

The report recommends that entry scores for teaching courses not fall below the 75th percentile and that all intending primary teachers be required to have studied maths, science and English to Year 12.

“The quality of learning by our children is critical in ensuring Australia has the skills and knowledge required to meet its future challenges, and quality and effectiveness of classroom teachers are the most important influences on effective learning,” the report says.

“Nobody can believe that capping the top salary for classroom teachers at about $70,000 places enough value on the enormous contribution they make to the future prosperity of our nation.”

The Business Council’s recommendations dovetail with those made by the economics group at the 2020 summit which called for Australia to have one of the best education systems in the world by 2020.

They also fit in with Labor’s pre-election commitment to recognise teaching excellence by paying bonuses to highly accomplished teachers of up to $10,000 per year.


Tuesday Column: Paying teachers for performance, Canberra Times, March 6, 2007

Lessons must be learnt if we are to keep teachers, Sydney Morning Herald, Wednesday, January 12, 2005

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Sunday dollars+sense: Why do brides buy their dresses, rather than rent?

Lets see what kind of an economist you are. Why do brides spend so much money - often thousands of dollars - on wedding dresses that they will never wear again, while grooms rent cheap suits, even though they will be able to wear them again?

Here’s another one: Why do some bars charge for water but give away bowls of peanuts for free?

Why do >diners at restaurants who split the bill typically spend more than those who don’t?

And some apparently non-economic questions: Why does a light come on when you open the refrigerator, but not when you open the freezer? Why do the doors> on 24-hour convenience stores have locks?

If you can come up with answers...

...you are probably a good economist. If the questions occurred to you in the first place, you are probably brilliant.

Robert Frank is one of the world’s leading economists. But a lot of his work has nothing to do with formulas. My favourite is about the employment arms race.

It helps to wear an expensive tailored suit at a job interview. But as soon as everyone discovers that the money will be wasted, and quite a lot of it. The outcomes will be the same as if no-one wore the expensive suits. It would make sense to ban them.

A few years back Frank noticed that his students seemed to be taking in very little. So he started asking them questions about the real world. Then he asked them to set the questions. Questions such as “Why do ads in newspapers sometimes include the phrase ‘as seen on TV’?

He wanted them to behave like David Attenbroughs, economic naturalists who asked questions about and describe the world they saw. He has just published the questions and answers in a book entitled The Economic Naturalist which might just help you discover that you’ve been an economist all along, or open your eyes to economics if it hasn’t yet happened.

(It is not available here yet. You’ll have to order it, a mystery I would like him to explain.)

Brides buy rather than rent expensive dresses because each is usually a unique fashion statement. It would be too hard for a hire company to store them in case anyone wanted that exact one again. Men are more comfortable conforming.

The other answers are in the book, although you might just want to fire up your inner economist and work them out yourself.

Robert H. Frank THE ECONOMIC NATURALIST: In Search of Explanations for Everyday Enigmas, Basic 2007 ISBN 046500217X

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Tuesday Column: Paying teachers for performance

Who’d want to be a teacher? Whether it’s back to basics, a national curriculum, or the latest: payment by results, politicians are forever drawing up new schemes designed to help teachers teach better.

Payment by results, apparently up for discussion at an education summit convened by the minister Julie Bishop next month, is particularly insulting.

The inference is that teachers aren’t being paid to deliver results at the moment.

Of course not everyone finds such an idea insulting. Australia’s chief executives, among them those whose performance has been the worst, seem to love it.

A few years back I was at the annual general meeting of Bluescope Steel, at the time chaired by Peter Smedley then lorded as a business genius for his stewardship of the Mayne health and logistics group, since broken up.

An elderly shareholder sitting near the back asked him why he felt the need to pay his chief executive a performance bonus on top of his salary.

Smedley replied in what I took to be a condescending tone that that in fact the chief executive received three salaries: a wage, which he said was a payment “for turning up”..., a short-term bonus for keeping the share price high in the short-term, and a long-term bonus for keeping it high in the long-term.

I thought it disturbing that one of Australia’s major public companies would pay its chief executive a six or seven figure salary “for turning up” – Smedley’s exact words – and I think that’s what disturbs me now about the idea of paying teachers extra for “performance”.

That, and the fact that performance is hard to measure.

Auditors love to tell this story: When Sydney had a problem with its trains running on time it collected statistics on every arrival and departure from every platform and compared it with the timetable. Drivers were instructed to more closely match the timetable. So they shot past stations without picking up passengers. I know, it happened to me. But it improved the drivers measured “performance”.

Auditors call this a misspecification – picking the wrong target.

But it wouldn’t happen in teaching would it? After all, the results of teaching can be measured quite precisely at the end of each year in standardized tests.

Well, yes it would.

The state of Iowa in the United States has been measuring primary school teaching outcomes for decades now as part of the Iowa Test of Basic Skills.

In 2002 a University of Chicago economist Steven Levitt played a hunch. Examining the test results for the eight years to 2000 he noticed that some teachers seemed to always to improve the academic performance of every class they taught. But those students seemed to regress to where they had been as soon as they moved on to different teachers.

Using high-level statistical analysis he concluded that 4 to 5 per cent of teachers in Iowa had cheated by “adjusting” the answers of their students after those students had completed the exam papers. (It helped that students were given pencils with which to complete the exam papers and that pencil is easily rubbed out.)

I have experienced a lesser form of teacher cheating myself. Many universities now ask students to grade their tutors at the end of each semester. Sitting in on a tutorial for a student who was ill I saw the tutor hand around biscuits and tell the class how much he loved each and every one of them before distributing the evaluation forms.

One of mantras chanted by those in the United States administering the No Child Gets Left Behind program which links school funding to test results is that “What gets measured, gets done”.

Critics of this type of program say that that is its weakness.

Its supporters in Australia may be surprised to know that it has been tried here before. I certainly was.

Last week the ABC’s Background Briefing radio program searched back into history to outline the results of the Victorian education department’s “Payment By Results” program introduced in the 1860’s.

Education historian Professor Richard Selleck explained that each Victorian teacher received a base salary, and then an extra salary dependent on the results that their children got (in much the same way as would Australian CEO’s more than a century later).

Inspectors would come into primary school classrooms and set and mark exams. The percentage that each class got in the exam would feed directly into the teacher’s performance pay.

As Selleck said: “In one sense when you went into a classroom, you were looking at your financial future, if you were a teacher.”

So teachers worked to ensure that their students did well.

As Selleck put it: “Teachers studied minutely the questions each inspector was likely to ask in reading, writing and arithmetic, whatever the course was. They passed them on to each other, they reduced their curriculum to the narrowest one possible, abandoning subjects that were not going to be examined and concentrating almost entirely on what was examinable.”

On AM last month the Education Minister Julie Bishop described the evidence to support performance pay for teachers as "overwhelming". She promised to release that evidence ahead of her April summit with state and territory ministers.

The most persuasive-sounding evidence to date comes from the Department of Education Reform at the University of Arkansas. It has examined the fledgling merit pay scheme in Little Rock, Arkansas funded by the Walton family which owns Wal-Mart. It finds that it has boosted maths results by 4 percentage points above those of schools without performance pay.

But it has come in for criticism. The associate editor of the Arkansas Times, Warwick Sabin put it this way on Background Briefing:

“Well I'll be very blunt with you. The Department of Education Reform at the University of Arkansas is only about a year old and it was established with money from the Walton family, which has a very public interest in pushing merit pay… They did not pick schools that already were performing very well, because those schools would not produce the improvement that the merit pay advocates would like to see.”

Merit pay may well have some merit. But until Julie Bishop releases the evidence she has assembled, we will have to be content with the publicly available evidence, which is far from conclusive and points to pitfalls. Many of us would be reluctant to entrust our children to teachers who were focused almost exclusively on measurable results.

The ANU economist Andrew Leigh is one of Australia’s leading proponents of performance pay for teachers. But, in apparent contrast to the minister, he is aware of its potential limitations. He says that designing a good merit pay system is hard but not impossible.

He told me that if he was advising the minister he would be suggesting setting up a series of different trials, using different methods of rewarding different types of performance in different schools. He says then we would know what education authorities in Little Rock and elsewhere still do not – whether rewarding teachers for performance works as well or better than rewarding CEOs, or whether it is impossible to reward the right things.

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Want more mathematics and science teachers? Try something else, anything else.

A key part of Kevin Rudd’s promised “education revolution” has come under attack from a former top Labor advisor.

The Labor leader last month promised to spend $111 million cutting the Higher Education Contribution charge for university students studying maths and science as a way of attacking the shortage of qualified maths and science schoolteachers.

Under Mr Rudd’s plan the HECS charge facing maths and science students would fall from $7,118 to $3,998 per year. He has also promised to have the government meet half of the HECS repayments of maths and science graduates for up to 5 years if they take up employment in an occupation such as teaching.

Economist Bruce Chapman of the Research School of Social Sciences at the ANU designed the HECS scheme in 1988 while working as an advisor to the Labor education minister John Dawkins. He later worked as an advisor to the Labor Prime Minister Paul Keating.

In a review of the Kevin Rudd proposal to be published today Professor Chapman says that despite Labor’s claims, cutting in the HECS charge is “unlikely to have discernible effects on enrolments in the short term”...

In 1997 the incoming Howard government adjusted all of the HECS charges, more than doubled the charge for students studying law. Professor Chapman says there was hardly any change in enrolment numbers as a result.

“This does not auger well for the likelihood of [HECS cuts] being an effective instrument in the short term to increase the supply of maths and science education students”, his paper says.

“A significant amount of research over the years has consistently found that changes to HECS, even large changes to HECS, have only tiny effects on the private financial return to having a degree.”

Professor Chapman also points out that in Australia the composition of enrolments at universities depends not on student demand but on the number of places offered. “The composition of enrolments is essentially agreed between the government and individual universities, and there is not a lot of change between years.”

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The art of persuasion, going once ...

Spare a thought for any people you know still trying to sell their house. They're about to be hit by another rise in interest rates, pushing prices down further. If it doesn't happen at 9.30am today it'll most likely happen at 9.30 on the morning after one of the next Reserve Bank board meetings.

And they are about to be told they can't trust their real estate agent.

Steven Levitt has been lauded by the American Economic Association as the most promising US economist under the age of 40. Ten of the economists it has previously so awarded have gone on to win the Nobel Prize. But Levitt seems to lack the necessary seriousness. Among his research topics are the voting behaviour of contestants on the game show The Weakest Link, the inner workings of the Ku Klux Klan, and the things people lie about at online dating sites.

His unifying theme is that people with access to information tend to abuse it. His hobby is catching them. Which brings us to real estate agents.

Levitt says he first became involved with agents when he went looking to buy a house. He felt they were subtly encouraging him to bid low. Which should have made no sense. Real estate agents are paid by commission. But then he took a closer look at the structure of those commissions.

Agents usually get a fixed proportion of the price the property sells for. (In Australia it is often 2 per cent.) That means that while the reward for actually getting a property sold is big, the extra reward for extracting a higher price can be tiny. An Australian agent who held out for an extra $50,000 for example might find herself earning only an extra $1000. But the cost to the agent of holding out might well be large: opening the house, accompanying visitors and negotiating contracts for weeks upon weeks until a higher price is reached. Holding out could destroy an agent's business.

But to the homeowner it's quite different. The owner usually wants the extra $50,000 and is prepared to wait. It is in the agent's financial interest to persuade the owner to sell more quickly than the owner should. And this is where what Levitt calls "information asymmetry" comes into play. The agent is an expert in the market. The owner is not. And they both know it. If the agent insists that a quick and cheap offer is actually the best offer the owner will feel obliged to agree.

Levitt figured that if this was happening, agents would act quite differently when it came to selling their own homes... They would hold out for longer and get higher prices. He examined the records of 100,000 sales in Cook County, Illinois, over a 10-year period and discovered that the agents did indeed get higher prices when they sold their own homes - about 3.7 per cent higher than the similarly featured and located homes they sold on behalf of their clients.

Of course, that could have been because they presented their homes better and tried harder to ensnare buyers. But if that was the case, Levitt reckoned that the agents' homes would have sold more quickly than those of their clients. In fact they sold a lot more slowly, staying on the market for 10 days, or 10 per cent longer. Agents appear to encourage owners to sell more quickly than they would do themselves.

And they appear to use a different language to describe those owners' homes. Certain words turn out to be associated with high prices when used in real estate ads. They include "granite", "gourmet" and "state-of-the-art". Each conveys specific useful information. Other words are associated with a lower price. They include "fantastic", "well maintained" and "charming". Levitt found that the agents tended to use the first group of words to describe their own properties, the second to describe their clients' homes.

He believes the words in the second group function as a sort of code. The phrase "well maintained" might signal to a buyer that a house is old but not quite falling down. A low offer might be accepted. "But to the 65-year-old retiree who is selling his house, 'well maintained' might sound like a compliment, which is just what the agent intends."

Levitt says it's difficult to function well as a real estate agent. You need to convince owners that you are acting in their interests while at the same time persuading them to settle for less than the best price and letting potential buyers know that a house can be bought for less than the best price.

It isn't that Levitt especially has it in for real estate agents. He believes that they are about as honourable as doctors, lawyers, car mechanics and teachers, all of whom can misuse their specialist knowledge to act against the interests of their customers. Doctors recommend and perform a higher rate of caesareans in regions where the birth rate is dropping. And teachers forge exam papers in order to push up pass rates.

In 2002, Levitt examined the eight years' worth of primary school exam papers submitted as part of the Iowa Test of Basic Skills. He looked for unusual patterns of answers that would suggest that teachers had "improved" the answers of their students (and their apparent performance as teachers) after the papers had been handed in. He found evidence suggesting that teachers had cheated in 4 to 5 per cent of the classes he studied. The school system retested 100 classes and fired the teachers it found guilty.

Which doesn't mean that we shouldn't put ourselves in the hands of experts. Levitt makes the point that it's often worth using experts even if you know they are trying to do you in. An untrustworthy real estate agent might still be better at selling your house than you would be yourself. A corrupt schoolteacher might still be better at teaching students than would their own parents.

But it pays to check up on experts. And that's getting easier. Levitt says before the arrival of the internet in the late 1990s Illinois real estate agents were able to sell their houses for about 5 per cent more than those of their clients. Afterwards the difference fell to 3 per cent.

It might also be a good idea to let the experts know you are on to them. I'd suggest buying two copies of Levitt's new book, keeping one for yourself and giving the other to your real estate agent. It's due out in the US next week. Here, you'll have to order it. Its disturbing title is Freakonomics: a Rogue Economist Explores the Hidden Side to Everything.

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Lessons must be learnt if we are to keep teachers

I grew up in a family of teachers. Around the kitchen table the shop talk used to be about the unending teacher shortage. Many of my own teachers had been flown in from Canada, Britain and the US in a bid to plug the gaps. Others were retirees, barely able to cope, drafted back part-time. My dad had been a lathe operator, drafted without training into teaching metalwork.

And then suddenly, in the middle of the 1970s, the pendulum swung. Instead of a shortage the crisis became one of a massive and growing oversupply. Graduates in teaching were no longer getting jobs as teachers. Teachers who had left the service could no longer get back in. Official projections pointed to a surplus stretching out decades.

Now the pendulum is swinging again. The NSW Education Minister, Dr Andrew Refshauge, has launched a parliamentary inquiry into the recruitment of teachers, with submissions due next month. There's talk of a looming shortage. A big chunk of the teaching workforce is set to retire in the next five years.

What is it about the job market for teachers that makes it swing so quickly from famine to feast? The answer tells us something about politics and a lot about the very unusual nature of the job and the people who stick with it...

First, politics: it is true that the number of teachers needed at any one time depends on the number of students, but it also depends critically on political decisions about the desired ratio of teachers to students.

The decisions are political decisions because state governments make them. The states are by far the biggest employers of teachers.

Beginning in the 1960s, state governments aggressively raised their targets for the employment of teachers per student, even as the number of students was soaring. Class sizes, as measured by the pupil-teacher ratio plummeted. Australia-wide the ratio slid from 26 to 19.

And then in the mid-1970s the politics changed. In the midst of a worldwide economic downturn and a political crisis in Canberra each state government either temporarily halted further falls in class sizes or slowed the process. (By the early 1990s states such as Victoria and South Australia actually pushed up their class sizes in response to financial pressures.)

Looked at this way, our state governments have created much of the teacher "shortage" and the subsequent "oversupply". And they have also created the shortage they believe is about to come. The surge in hiring between the mid-1960s and the mid-1970s produced a workforce heavy in graduates of that time who are now approaching retirement.

But if it is our governments that create the swings in the job market for teachers, it is our teachers that turn them into crises. Here's how.

More so than in most professions, teachers don't particularly like teaching. Consider this: an astonishing 20 per cent of Australian teachers leave teaching within their first three to five years. In some parts of Australia, 50 per cent leave. The University of Sydney's Dr Jacqueline Manuel describes teaching as "the profession that eats its young".

Some of those who leave come back later. In fact, leaving, trying something else, and then returning is common in teaching. Some leave to start families, some leave to broaden their experience, and others treat teaching as a job of last resort.

Until the jobs dry up. When in the mid-1970s the state governments cut back their hiring rates, resignation rates plunged. The fear was it mightn't be possible to get back. Because resignations had typically created the bulk of teacher job vacancies, the hiring rates fell further, pushing resignations down further still, drying up the flow of teaching jobs almost completely.

(Naturally this frightened many would-be teachers and in time they moved away from teacher training courses, easing the surplus. But their decisions took years to have an effect. It takes three to four years to finish a teaching degree. Students who had already started continued to graduation.)

The same mechanism will work in reverse in the coming teacher shortage. The more job vacancies governments need to fill, the more relaxed teachers will feel about resigning, creating even more vacancies to fill, worsening the impending shortage.

If only there was a way to make teachers more serious about staying teachers. The Teachers Federation suggests higher salaries. Surprisingly, it's a proposition not strongly supported by evidence.

Melbourne University's Dr Michael Shields has examined the movement of teachers in Britain. He finds that most teachers who leave go to jobs that pay less than they got teaching, typically 22 per cent less expressed as an hourly wage. The new jobs have longer hours as well. Teachers are prepared to give up money and work longer hours in order to get out.

Shields has modelled the effect of a boost in teacher salaries of 10 per cent. He finds it would cut resignations by less than 1 per cent.

That isn't to say that higher salaries might not be important as part of a broader package of measures designed to get teachers to feel better about teaching. The 2001 Vinson report into public education described higher pay as a "gesture" and said that morale among teachers was so low that no other gesture could substitute for improved salaries.

But by itself higher pay would be wasted. There is something fundamental about the job or the way we ask people to do the job that makes teaching unsustainable for so many of our teachers.

For some it's a love-hate thing. Teachers report both greater levels of job satisfaction than other people and higher levels of stress.

My father told me that teaching was the only job he knew in which every day he faced people trying to stop him achieving what he was employed to achieve. They were called students.

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