Baltimore recently completed a “four-year effort to transform the traditional teacher-pay schedule into one emphasizing professional accomplishments over credentials and seniority.” As Hugh Rockoff noted decades ago (1984 – cite below), “the price system does a great deal of work,” meaning that substitutes for the price system’s allocation process inevitably require a large commitment of people and money, and that costly regulatory substitutes do not perform nearly as well as market-determined (=freedom-determined) dynamic price change. Rockoff argued that regulated price change had performed acceptably only when it existed temporarily on a comprehensive basis to ease the transition to improved policies. In this case, the four years of hard work at something markets do much better, at no cost, was the basis for payments to Baltimore’s teachers.
Admittedly, it was a noble effort that persisted over the four years because the longtime status quo in most places is the disastrous “single salary schedule” wherein teacher pay only depends on general credentials and experience. That means teacher pay is the same for different subject credentials, and for different campuses within the district, regardless of whether the regulated salary level was enough, or too much, to attract the desired skill mix for each campus. That usually means there will not be enough math and science teachers, anywhere, and not enough of the most effective teachers at the most challenging or poorly sited campuses. Single salary schedule also means teacher pay does not depend on accomplishments, including especially genuine effectiveness, which may differ from a narrow, sometimes fraudulent test score measure of effectiveness.
Baltimore developed a point system that shifts price control from total pay to base total pay plus the basis for supplemental pay. “Baltimore teachers earn incremental pay boosts each time they compile 12 achievement units or AUs. District- and union-staffed panels spent more than two years determining which activities should count towards pay, and creating the rules for the promotions (supplemental pay awards), a task all parties agree proved stressful and bewildering at times.” For example, on what concrete basis do you specify the AU value of coaching teachers vs. teaching children directly vs. creating new programs?
Who decides if/when an activity or assignment meets the definition for an AU award? I would not want to be that person, or on that committee. A key market virtue is that the basis for value determination is impersonal. For example, suppose a district wants to have a teacher coach on a specific campus. There will probably be a known, approximate market price for educators qualified to do that. The locals can adjust that up or down a bit depending upon how many applicants they get. Both employer and applicants know that the salary level is largely externally determined; a “going rate”, so there is no one to blame for earnings not being higher.
And then there is the critical problem of financially keeping up with AU awards, and matching the quantity provided with the quantity of an activity needed. Earning additional AUs does not put more money in district coffers, either contemporaneously, or eventually through higher tax rates, or sufficiently higher property values. What if the price (AU) ― setting committee sets too high a price on something; too many AUs for something that is easy, or becomes easy? Then there is a financial problem funding the salary increases, and a surplus of that something. Price regulation forgets that per-unit value depends on quantity provided.
The noble Baltimore attempt to escape the ravages of the single salary schedule may be better than what it replaces. And whether it is or not, the inevitable difficulties that will arise will hopefully show that market-determined teacher salaries are the best available option.