Association for Public Policy Analysis & Management

The Obama Administration’s Teacher Incentive Fund Program and Race to the Top Initiative encouraged many states to experiment with teacher incentive pay. In Tennessee, some school districts developed incentive pay plans that provided teachers with bonus awards while other districts incorporated incentive pay into their salary schedules. This paper uses panel data on individual teachers and instrumental variables regression to examine the impact of those incentive programs on teacher retention. Preliminary analysis suggests that Tennessee's strategic compensation programs had a significant impact on teacher turnover in participating schools. Teachers who received large awards were significantly more likely to be retained while teachers who received no award were significantly more likely to turn over. On net, turnover rates rose in bonus program schools. Rates rose because there was an increase in the percentage of teachers moving to other districts, not because there was a significant increase in the percentage of teachers leaving the public school system in Tennessee. Furthermore, the teachers who are moving between districts in the wake of the strategic compensation program appear more likely to be teachers with low Tennessee Value Added Assessment System (TVAAS) scores than teachers with high TVAAS scores. This is somewhat disconcerting, as it implies that other districts are absorbing teachers who are somewhat less effective than average. The strategic compensation programs may have had unintended consequences for non-program schools and districts.