Improvement #6: Replace Seniority-Based Salary Schedules with Performance-Based Pay Scales

Improvement #6: Replace Seniority-Based Salary Schedules with Performance-Based Pay Scales

Most public school teachers in Michigan are paid according to a seniority-based salary schedule, which awards compensation according to a teacher's years of experience and level of education. This is in contrast to most other areas of commerce and industry, where employees working under a "merit-based" schedule receive compensation that is commensurate with their job performance and productivity.


Under a seniority-based, or "single salary schedule," system, individual teachers have a reduced incentive to innovate or excel in the classroom since their level of compensation is not tied to their performance. Despite this, most collective bargaining agreements in Michigan establish teacher salary schedules based solely on a teacher's level of education and years of experience.

These salary schedules are organized into a "grid" which provides for automatic pay increases based upon the number of years a teacher has spent in the district and the kind of college degrees or number of additional academic credit hours he has accumulated or both. These increases are commonly referred to as "step" increases.

Typically, the foundation of the grid is the "base" salary which is equivalent to the salary given to a first year teacher with a bachelor's degree. The remainder of the grid is based upon a percentage of this base salary. For example, a second year teacher with a bachelor's degree might receive a salary 1.04 times the base, a first year teacher with a master's degree might receive 1.10 times the base salary, etc.

As a consequence of this grid, school districts incur additional salary expenses even if there is no change in the base salary. The amount of each salary increase varies depending on the distribution of the district's work force. Districts with more teachers at the lower salary steps, for example, will incur greater expenses than those with more at the top step. These increases may be as high as three percent. All current collective bargaining agreements in Michigan require teachers with master's degrees to be hired according to their step on the pay grid-even when a teacher is willing to work for a lower salary.

If the base salary is also increased, the impact of the step increases is compounded, resulting in greater expense. All associated costs, such as retirement contributions, Medicare and Social Security taxes, etc. are likewise increased.

Many contracts also provide raises for teachers who have "maxed out" the grid at the top step. These raises are referred to as "longevity" steps-cumulative salary bonuses for teachers with many years of experience within a district-and do not appear on the salary grid. Nonetheless, they increase a school district's overall salary and salary-associated expenses.

In most school districts, entry level teachers with only a bachelor's degree and no prior teaching experience receive the base negotiated salary; few districts reserve the unrestricted right to establish the starting salary for a teacher on any step of the pay scale.

Similarly, all current collective bargaining agreements in Michigan require teachers with master's degrees to be hired according to their step on the grid-even when a teacher is willing to work for a lower salary. At the same time, the majority of agreements cap the number of years of out-of-district experience for which a teacher may receive compensation.

Collective bargaining language regarding experience often limits a teacher's salary increases to experience gained within his current district rather than including the total of his experience. The practical consequence of this salary system has been that experienced and highly educated teachers who want to switch districts often find that they cannot do so: Districts that may wish to hire such teachers are unwilling or unable to start them at a salary level commensurate with their credentials.

School districts using a single salary schedule also experience hiring limitations, often finding it difficult to attract good teachers in technical subjects. Many with advanced degrees in science, engineering, or computers prefer to work for employers that offer merit-based pay rather than for schools offering the inflexible pay scales of union contracts.

Teachers working under a seniority-based salary system face a number of disincentives and drawbacks. Such a system does not provide adequate incentives for them to continuously improve their job performance, teaching methods, or professional development in their subject areas.

Without the incentives and motivation that come from the promise of additional compensation, teachers must instead be internally motivated to continue to improve the educational product offered to students. Some teachers, to be sure, are strongly motivated by their passion for teaching-and it is precisely those teachers who deserve recognition through a merit-based pay system for their outstanding classroom contributions.

Another example of the seniority system's inherent unfairness is that only teachers with a combination of both education and experience are able to reach the top of the salary schedule. In other words, a teacher who worked in his district for over thirty years but lacked a doctorate, specialist, or master's degree plus a set number of academic course hours could not advance to the top of the salary scale, no matter how effective an educator he was.

Seniority-based salary schedules also result in "wage compression." Wage compression occurs when the incremental rates of pay between the highest and lowest salaries become reduced through the application of wage increases to the lowest pay level. When an equal percentage of increase is not applied to each salary level, the difference between salaries shrinks, or becomes "compressed." There are practical financial reasons for applying wage increases to the lowest level salary, but the teachers at the top of the pay scale may resent this.

Despite this lack of flexibility and fairness in teacher compensation, many union officials maintain that seniority-based salary schedules that punish the very teachers they represent are the "fairest" system. One current contract provision even bluntly states, "Under no condition shall a teacher be compensated above his/her appropriate step on the salary schedule."93 Such contract language can serve only to dampen individual teacher motivation, initiative, and performance.

Unions such as the NEA remain opposed to changes in the seniority-based salary system. The NEA "believes that performance pay schedules, such as merit pay, are inappropriate."94 The NEA's 1997-98 Resolutions further hold that salary schedule systems must be established based on "preparation, professional growth and length of service and exclude any form of merit pay."95

School districts attempting to establish performance-based pay schedules for their teachers have invariably met with union resistance. However, some districts such as Saginaw have been successful in bargaining a portion of their teachers' salaries based on the requirement that teachers meet certain district-wide goals adopted by the school board.96


School boards should remove seniority-based salary schedules from their collective bargaining agreements and institute performance-based pay scales that reward outstanding teachers, encourage innovation, and attract the best people for the important job of educating tomorrow's leaders.

A performance-based salary schedule can be based on either teacher performance or student performance. The Michigan legislature in 1995 strengthened school districts' rights to create performance-based salary systems when it passed PA 289 into law. PA 289 states in part that, "A school district or intermediate school district may implement and maintain a method of compensation for its employees that is based on job performance and job accomplishments."97

In 1993, AFT union president Albert Shanker himself proposed performance-based pay, acknowledging that such a system could be developed without being anti-union and its flaws "would be very small compared to what we have now or compared to what you would have without such a system."98