Save Money, Improve Student Learning, and Boost The Economy By Paying Teachers to Quit Their Jobs

Moneybox
A blog about business and economics.
Aug. 15 2013 12:41 PM

Save Money, Improve Student Learning, and Boost The Economy By Paying Teachers to Quit Their Jobs

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CHICAGO, IL - MARCH 29: A tattered American flag flies upside down outside of Marconi Community Academy elementary school.

Photo by Scott Olson/Getty Images

Collective bargaining agreements typically specify that veteran teachers should get annual raises. Consequently, a teacher with 16 years of teaching experience is going to be paid a lot more than a teach with only two years of eperience. That means a school district can sometimes save money by essentially paying veteran teachers to quit. You create a financial incentive, in other words, for teachers to retire early.

The rational citizen, however, will worry that this is going to be penny wise but found foolish. Sure you'll save money, but the quality of the teaching workforce will be degraded by the loss of veteran talent. And yet when Maria Fitzpatrick and Michael Lovenheim looked at an early retirement incentive program that Illinois implemented in the mid-1990s they did not find evidence of this adverse impact: "We find the program did not reduce test scores" they write "likely, it increased them, with positive effects most pronounced in lower-SES schools."

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One way to interpret this is as bolstering a larger literature which says that school districts overweight experience in devising their teacher compensation schemes. On the other hand, it's possible that the teachers who respond to a given early retirement incentive are disporportionately ineffective compared to the average teacher.

Either way, it suggests a possibly appealing form of economic stimulus. The federal government could borrow a bunch of money at today's low interest rates and make it available to states and cities that want to pursue cost-saving early retirement incentive programs. The cash up front aspect of the ERI program would goose the economy in all the usual ways. But the long-term savings to state and city governments would improve the long-term fiscal outlook and thus boost "confidence" (or whatever). Kids would be no worse off in school. Districts would have to hire a bunch of new teachers, opening up some job opportunities for young people. And it's all voluntary—veteran teachers who'd rather stay on the job and get paid what they're owed can do so.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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