Panel Paper: Do Former Teachers Earn More Outside the Classroom? New Evidence on the Teacher Pay Penalty

Saturday, November 9, 2019
Plaza Building: Concourse Level, Governor's Square 17 (Sheraton Denver Downtown)

*Names in bold indicate Presenter

David S. Knight and Jinseok Shin, University of Washington

Poor teacher pay is an enduring policy problem, recently motivating teacher strikes and calls for major school finance reforms. Studies show teachers generally earn lower hourly wages than similarly educated professionals working in the same labor markets, leading to a “teacher pay penalty.” Relative teacher compensation is an important predictor of attrition out of the teaching workforce. Policymakers thus worry that teachers leave their jobs for higher paying employment outside of education. Yet, only a few studies examine the actual salaries former teachers earn outside the education sector, or what factors contribute to differences in earnings of former teachers. Knowledge of the characteristics of teachers and labor markets associated with greater salaries for former teachers can help inform teacher compensation policy.

We link statewide Texas Education Agency administrative data to unemployment insurance records from the Texas Workforce Commission, allowing us to track former teachers into the non-education sector. We find that prior analyses underestimate the salaries of former teachers working full time outside of teaching. Former teachers employed full time receive an increase of 22 percent in wages when they stay in the K-12 sector and 25 percent when they leave the field of education. Consistent with past research, former teachers’ salaries vary widely, relative to variation in wages while teaching. Teachers who are more effective at raising test scores, hold a masters or doctoral degree, and who teach math and science courses tend to earn higher salaries than otherwise similar teachers and these teacher characteristics provide greater returns outside of teaching, especially outside the K-12 sector, relative to within the teaching profession. Finally, returns to teacher effectiveness are greater among former teachers who: (a) worked in urban and suburban schools; (b) had more years of teaching experience; and (c) entered the Finance and Insurance, Public Administration, and Professional, Scientific, and Technical Services industries. Because some urban centers have more jobs in these non-education industries than others, these trends may place greater pressure on some urban districts to retain their most effective teachers.