Jonathan Chait

How Performance Pay Works

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Recently, Vanderbilt studied the effect of teacher bonus pay in Tennessee. It found that awarding bonuses to teachers who produce high results did not improve performance. Opponents of performance pay have been crowing that this shows performance pay doesn't work -- teachers, they say, are already doing their best, so you can't wring better results out of them by dangling bonuses.

Of course, the point of performance pay isn't to wring better results out of the same teaching pool. It's to change the composition of the teaching pool. Teachers tend to come from the lower ranks of college graduates. That's natural, because the profession pays poorly compared with other jobs requiring college degree and does not offer financial rewards for success. The idea of merit pay is that you lure into the profession people who want to be treated like professionals -- they run the risk of being fired if they're incompetent, but they can also earn recognition and higher pay for exceptional performance. That's a long-term process. But it also shows some signs of immediate effect:

The Vanderbilt researchers also didn't investigate performance pay and its effect on recruitment. But many school district leaders believe that the programs attract talented teachers who want to be rewarded for their success with students. In fact, after D.C. public schools announced a new bonus system, which pays teachers for improvements in test scores, teaching applications soared 300 percent.

In the long run, performance pay is going to work if it changes the basic perception of teaching. A program here or there probably won't change all that much. D.C.'s program probably worked so well because it was so high-profile.

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