Association for Public Policy Analysis & Management

Evidence that educators differ substantially in their effectiveness has fueled interest in the possibility that linking educators’ compensation to their performance could improve student outcomes by enabling schools to attract and retain more effective teachers and by motivating educators to improve their practices. In 2006, Congress established the Teacher Incentive Fund (TIF), the largest federal grant program to support performance-based compensation systems for teachers and principals in high-need schools. Through TIF and its successor, the Teacher and School Leader Incentive Grant program, the U.S. Department of Education has awarded multiple rounds of grants totaling billions of dollars.

The Institute of Education Sciences at the U.S. Department of Education commissioned a multiyear evaluation of the TIF grants awarded in 2010. A subset of the 2010 TIF grantees participated in a random assignment study of pay-for-performance bonuses that were funded by TIF. Within each evaluation district, half of the participating schools were randomly assigned to offer pay-for-performance bonuses to teachers and principals for four years (treatment schools), and the other half could not (control schools).

The proposed presentation will summarize findings from the fourth and final report on the implementation of TIF and the cumulative impacts of pay-for-performance bonuses across all four years of the program. The main findings are:

• Student achievement. Pay-for-performance improved students’ reading achievement after 1, 2 and 3 years of implementation, and students’ math achievement after 3 years. These effects amounted to about 3 to 4 weeks of learning.
• Teaching understanding of bonuses. Many teachers in schools that offered performance bonuses were unaware they were eligible for a bonus or underestimated how much they could earn from a bonus. Over the four years of implementation, at least 39 percent of teachers in treatment schools were unaware they could earn a bonus and on average, believed that the maximum bonus they could earn was no more than 40 percent of the actual maximum bonus districts awarded.
• Teacher satisfaction. Although initially less satisfied with their jobs and TIF, teachers in treatment schools were as satisfied as, and sometimes more satisfied than, teachers in control schools by the third year of implementation. In the first two years of TIF implementation, teachers in treatment schools tended to report being less satisfied than teachers in control schools. However, in Years 3 and 4, treatment teachers were no longer less satisfied than control teachers on any of the measured dimensions and, in fact, reported being more satisfied on some dimensions. For example, in Year 4, more treatment teachers than control teachers were satisfied with feedback on their performance (87 versus 77 percent) and believed TIF caused teachers to work more effectively (59 versus 51 percent).
• Cost-benefit analysis. The study compared the cost-effectiveness of pay-for-performance to two other policies - transfer incentives and class-size reduction. At the end of two years, pay-for-performance and transfer incentives were similar in their cost-effectiveness – to raise student achievement by .04 standard deviations cost about $200 per student. Across four years, pay-for-performance was more cost-effective than class-size reduction.