Historically, resistance to merit pay meant that few such programs were tried. Recently, however, many states around the nation — in districts large and small; rural, urban and suburban — have begun to implement pay-for-performance systems.[*],[12] Although only a few rigorous studies of merit-pay programs have been conducted, research has begun to suggest that well-designed pay-for-performance plans can lead to better student achievement."[13]

The Achievement Challenge Pilot Project, which was instituted in the Little Rock public schools from 2004-2007, was a performance-pay plan that tied bonuses for school personnel solely to students’ progress on standardized tests. Teachers in the five participating elementary schools could earn bonuses of approximately $10,000 for their individual students’ achievement gains, and other school personnel could earn awards of various sizes based on schoolwide test improvements.."[14]

A program evaluation led by Marcus Winters and Gary Ritter of the University of Arkansas indicated that students in ACPP schools had relatively large and statistically significant gains in math and language arts compared to students in nonparticipating district schools.."[15] Although critics of merit pay suggest teachers will begin to compete, rather than collaborate, and avoid working with traditionally low-performing students,."[16] the ACPP evaluation found no evidence of these problems.[†]

Other programs, such as the Teacher Advancement Program, blend performance pay with other rewards. TAP was initiated by the Milken Family Foundation,."[17] and the program is currently being implemented in over 180 schools."[18] in 13 states nationwide.."[19] There are four basic components to TAP: targeted professional development programs, performance-based compensation, an intensive performance evaluation system, and a "career ladder," which essentially allows high-performing teachers to earn higher pay while remaining instructors.."[20] In some locations, TAP also provides "differential pay," which is additional compensation for teachers "who teach in ‘hard-to-staff’ subjects and schools."[21]

The TAP model is employed in the Chicago Public Schools’ "Recognizing Excellence in Academic Leadership" project, a pilot performance-pay plan in the district’s high-need schools. Project REAL was adopted in collaboration with the Chicago Teachers Union,."[22] and the union has equal representation on REAL’s governing council.."[23] The program is financed by district revenues, by a grant from the federal Teacher Incentive Fund, and by support from the Broad Foundation, the Joyce Foundation and the Chicago Public Education Fund.."[24] Among other rewards, REAL teachers and principals can earn annual merit-pay bonuses of up to $5,000 and $4,000 respectively, based partly on statistical measurements of student achievement growth on standardized exams, both schoolwide and in individual teachers’ classrooms.[‡],"[25]

Another prominent plan that contains elements of performance pay is "ProComp," the Denver Professional Compensation System. Like Chicago’s REAL, ProComp was adopted with support from the local teachers union, the Denver Classroom Teachers Association.."[26] The plan started as a pilot project in 1999."[27] and expanded to allow all Denver Public Schools teachers to participate in 2004.."[28] Denver voters also approved a $25 million tax initiative to help finance ProComp in November 2005.."[29]

Unlike the Chicago plan, however, ProComp compensation is not simply a bonus system; it shares major elements of the single-salary schedule and is meant to replace that schedule altogether. According to Denver Public Schools documents, "The starting salary for first-time teachers is based on their education and experience."."[30] But ProComp bases teacher compensation increases on several criteria: "completing professional development units"; "achieving a graduate degree or advanced license"; "earning a satisfactory evaluation"; and "achieving two student growth objectives per year."[§],[31] Meeting student achievement objectives can earn teachers a permanent increase of up to 4 percent of the basic "salary index" (the index was $35,568 in the 2007-2008 school year).."[32]

ProComp is a step in the right direction, but has plenty of room for improvement. Relatively little of the salary enhancement is tied to improved student outcomes, while there are still significant salary bumps for additional certifications and degrees. In the end, this program focuses too much on districts’ giving teachers skills and knowledge, and not enough on teachers’ giving students skills and knowledge.


[*]In this paper we use the words pay-for-performance and merit pay synonymously.

[†]Another concern often expressed by critics is the possibility that merit-pay compensation encourages teachers to focus on skills that appear on student achievement tests to the exclusion of important skills that do not. To the extent this concern is legitimate, however, the problem is not with merit pay per se, but with the exams on which the pay is based. A good exam schedule will ensure that all important conceptual skills are tested.

[‡]The National Institute for Excellence in Teaching, which is the administrative arm of the TAP program, has released research that claims the program has been effective. (See http://www.talentedteachers.org/publications.taf?page=22 for a summary of the study.) Some legitimate questions can be raised about the NIET’s findings, however; see Springer, M.G., Ballou, D. & Peng, A. (2008), Impact of the Teacher Advancement Program on Student Test Score Gains: Findings from an Independent Appraisal (paper presented at the National Center on Performance Incentives: Nashville, TN).

[§]Teachers can also earn one-time bonuses for "working in one of the hard to staff schools" or "working in a hard to staff assignment."