It is difficult for many educators, policymakers and community members to accept the need for fundamental changes to how Michigan compensates teachers. The mere mention of the words "merit pay" — the idea that teachers receive at least part of their compensation based on their students’ performance on exams — often evokes a defensive response from many well-intentioned teachers and policymakers, who recoil when they perceive any implicit criticism of Michigan’s teachers.

This is ironic. Well-designed merit pay would, after all, reward Michigan’s many fine teachers with additional income and a tangible sign of their employer’s esteem. True, a good merit-pay system would also put real pressure on ineffective teachers to improve quickly, but this hardship should be weighed against the important benefits to Michigan’s many good teachers, whose jobs are made harder when their peers perform poorly, and to Michigan’s children, whose learning is harmed when teachers fall short. Ultimately, a sound merit-pay program would help good teachers, spur underperforming teachers and improve student achievement from the start.

A well-designed merit-pay program would also have the long-term impact of improving the composition of the state’s teaching workforce. Good teachers would have further incentives to remain in the profession and to continue performing well. Talented undergraduates and career-changers would have new reasons to consider the teaching profession, since their teaching ability, rather than their university credentials or their ability to log long years on the payroll, would count most. At the same time, ineffective teachers who were unwilling or unable to improve their classroom performance would have less incentive to remain in the profession, since the pay schedule would no longer reward them just for completing another year on the job. The resulting compositional changes in the teaching workforce would further improve student achievement in the long term.[10]

The current skepticism of Michigan’s public education community toward merit-pay proposals suggests that a privately financed pilot program could be a helpful — even necessary — prelude to comprehensive changes in public school teacher compensation policy. The key to a successful merit pay reform is that a program be well-designed and perceived as fair. Programs that have been implemented recently have been more appealing to teachers and have produced the "buy-in" that is important for the success of performance-pay reforms. The plan we present in this paper aims to reward teachers for elevating student achievement and to generate interest in re-examining current teacher compensation schedules.