Association for Public Policy Analysis & Management

A common feature of public sector teacher labour markets world-wide is the use of teacher pay scales. This paper examines how schools in England reacted to the abolition of pay scales and the deregulation of teachers’ pay. This resulted from reforms that required schools to determine pay using teacher performance measures, as defined by the individual schools. We find that while remnants of the old pay schedule survive, schools use this flexibility to reduce the proportion of the budget spent on teachers. However, by exception, schools situated in locations with high demand for teachers saw relatively higher teacher pay and greater dispersion of pay within schools. We conclude that schools react to local labour market conditions, that there is evidence of local monopsony power, and that centralized teacher pay schedules led to a misallocation of school resources.