Association for Public Policy Analysis & Management

The uniform salary schedule used to determine compensation for most teachers has been scrutinized for a variety of valid reasons; there are no consequences for poor performance, there is no monetary reward for excellence, and pay raises are not related to actually teaching effectively.  Many schools have altered or supplemented their salary schedule with incentive based compensation intended to elicit greater effort from all teachers, and recognize and reward those who excel.  The magnitude of incentives available, whether they are awarded to individual teachers or teams of teachers, and the activity that the incentive is attached to ( input or output) have varied with the plan.  In this paper we collect the findings of empirical research on merit-based teacher compensation and use meta-analytic techniques to quantify the overall effect of incentive compensation on achievement, teacher retention, and identify the characteristics of a successful merit pay program.