Complete report, Making Teacher Incentives Work
North Carolina has operated one of the country's largest pay-for-performance teacher-bonus programs since the late 1990s. New research shows that a North Carolina-style incentive-pay program has the potential to improve student learning by encouraging teachers to exert more effort on the job. The North Carolina model avoids three pitfalls associated with implementing individual-level pay-for-performance plans: the problem of grades and subjects without standardized tests, the problem of teachers fighting for the best students, and statistical noise in test scores. The program also enjoys broad political support, including from the state teachers union. Education reformers worldwide should understand how performance pay can improve student learning.
North Carolina teachers receive pay supplements of up to $1,500 when the standardized test performance of all students in their school improves by more than a predetermined amount.
The bonus program leads teachers to exert more effort on the job: the average teacher took 0.6 fewer sick days, and standardized test scores rose by about 1.3 percent of a standard deviation in reading and 0.9 percent in math.
Results indicate that individual-level incentives would actually have a weaker effect than school-level ones. Many teachers would qualify for individual-level bonuses without trying, and others would not qualify no matter how hard they tried.
Teacher incentives are cost-effective. Compared to other popular education reforms, such as reduced class sizes, incentives provide more than four times the amount of student improvement per dollar spent.