Travis Wilkins

EC 451 Dr. Youngblood

21 November 2016

Do the Wages of Educators Affect Student Performance?

Introduction

Education is necessary for the betterment of society; it is how going forward the current

generation will solve the worlds challenges. However, we need to make sure that we are

properly educating our children. Over the years, there has been discussion over the compensation

of educators in our great state of North Carolina. I do not believe it is a secret that we have had a

recent increase in the number of teachers leaving the state; in 2015 alone, the state experienced

over 1,000 educators leaving the state, no doubt a significant increase from the year 2010, where

only 366 educators left the state. North Carolina has tried to correct this mass exodus of

educators within our state, and has raised teachers pay. However, this pay raise has not kept up

with the rate of inflation. Nationally, teachers pay has decreased over the course of the past few

years. This flight from our state has led to questions regarding how do we retain our teachers?

Also, how is this educator exodus affecting students within the state of North Carolina?

Previous research has been conducted analyzing this issue. Dr. Eric A. Hanushek, along

with Dr. John F. Kain and Dr. Steven G. Rivkin conducted a study in 1999 to answer the question

Do Higher Salaries Buy Better Teachers? In this study, teacher test scores (new elementary

teachers must take two certification tests) and student achievement were used to identify the

relationship between quality and salaries. A key point argued is that teacher quality is an

important determinant of achievement. However, Dr. Hanuskek also discusses in his research the
difficulties in analyzing the true relationship between teacher quality and teacher salaries. For

example, salary can also depend on the working conditions and the environment that an educator

is in. Less desirable jobs will be incentivized with more pay, meaning that the quality of the

educator is not necessarily indicated by compensation only. In Hanushek, Kain, and Rivkins

model, they used hiring and retention policies (hiring and retention practices are an important

element in the labor market for teachers), alternative earnings opportunities and amenities (which

looks at the differences in other opportunities presented to potential teachers), working

conditions (teachers might take lower salaries to work in nicer schools), and worker skill and

preference (differences in worker productivity and preference based on geography, etc.). It was

mentioned that these regressors were challenging to quantify; however, they were included in

order to reduce the likelihood of omitted variable bias as much as possible. Through their

research, they concluded that student outcomes are not consistently related to either teacher

salaries or per pupil expenditures. Furthermore, in Dr. Hanusheks previous research studies

conducted in 1986 and in 1997 found similar results. It was demonstrated that assessments of

teacher wage effects have failed to provide evidence that teacher wages matter.

Dr. Susanna Loeb and Dr. Marianne E. Page analyzed the previous studies conducted by

Dr. Hanushek and found areas where bias might have affected the results. They argued that since

previous research was conducted based on the cross-sectional point of view, it would be biased.

Another key issue brought to light is that, assuming parents have the option to choose where

their children are educated, parents often choose schools based on their perceived quality,

making teacher wages endogenous; this will bias wage estimates upwards. In addition, teacher

wage changes may have a lagged effect on measurements, meaning that changes in teacher salary
may influence education and student outcomes overtime. Dr. Loeb and Dr. Page also argue that

previous studies do not account for alternative wage opportunities effectively, which impact the

opportunity costs of teachers. Therefore, Dr. Loeb and Dr. Page conducted their research based

upon labor market factors, in addition to using the time-series approach so that they could look

for the possibility of a lagged effect and to avoid possible bias. Their conclusion was very

different from Hanusheks; they concluded that raising a teachers wage by 10% reduces high

school drop-out rates by 3-4%.

Other studies have produced similar results. An international study conducted by Dr.

Peter Dolton and Dr. Oscar D. Marcenaro-Gutierrez in 2011 ascertained that an instructors

salary does have an influence in the performance of their pupils. In the United Kingdom,

following two birth cohorts 16 years apart, it was found that teacher real pay had fallen and so

too did the quality of instructors, as noted by their decreased results in IQ type tests. Their

argument was that advanced economies have faced increasing demand for skills outside teaching,

which have increased the opportunity costs of becoming teachers, thus resulting in a reduction of

teacher quality.

Model

Based on the research conducted, I have created a model that uses similar variables as

discussed above. Considering that district data is harder to find, as discussed by Dr. Loeb and Dr.

Page, I decided to use state-level data. Dr. Loeb and Dr. Page also discussed the benefits of using

panel data, so I did each of the 50 states, plus the District of Columbia and the overall national

average, between the period of 2003 and 2013, with two year intervals (2003, 2005, 2007, etc.).

As a gauge for student performance, I used the average mathematics test results for 8th graders;

since it is a standardized test, it will be easier to see how differences in the environment affect
scores of students. I also will use the average reading test results for 8th graders, just to observe if

there are major differences between mathematics and reading. To observe teachers pay, and the

influence that it has on student performance, I also gathered data on the log of teachers pay. The

log of teachers pay is a more effective strategy to see just how much difference there is in

teacher pay across the nation. Dr. Loeb and Dr. Page also used the log of teachers pay within

their study, and inspired me to use my next variable as well. They also used the log of median

income in their research as well (Loeb 400). Looking at the log of median income can help to see

how close, or not close, instructors are paid to the median level of the state. If teachers are paid

less than the median, do test scores drop due to the possibility of a drop in instructor quality?

Log of the median income can also show the socio-economic standard of the state. For instance,

some states have a much higher cost-of-living than others do; is this change reflected in teachers

salaries, and does this have any impact on test scores directly? In addition, I also included the

average test scores of 8th grade students when their teacher has a bachelors degree versus a

masters degree. In Dr. Hanusheks model, he found that the main component that can affect

teachers salary include whether teachers reached graduate education levels (Hanushek 2). Does

the difference in degree make a difference in student test scores? In other words, does the

difference in education level of the instructor warrant a pay difference? I observed this difference

through both average 8th grade mathematics and reading scores. Furthermore, Dr. Loeb and Dr.

Page, in their research looked at the demographic makeup of schools by state. I wanted to look at

this myself, because I thought it would be an interesting perspective for the environment of

students within state public school systems. Is there a significant difference in the proportion of

white versus Hispanic students? Obviously each states demographic makeup varies

significantly, but I wanted to test to see if the school population had any influence on test scores
as well. If there is a higher population of minorities within a state school system, is there a

possible learning barrier resulting from significant differences in language and culture? Does this

have a significant impact on test scores (teachers might not necessarily be to blame for lower test

scores in this scenario)?

Table 1

Coeffici Std. P-
Variable Name ent Error t-ratio value
Constant** 252.508 97.4164 2.592 0.0124
Log Teacher Pay 3.52606 18.0076 0.1958 0.8455
Log Real Median -
Income 17.5103 18.9409 -0.9245 0.3596
Bachelor Degree 0.05408 0.12347
Math 29 8 0.438 0.6632
0.15203 0.13084
Masters Degree Math 4 5 1.162 0.2507
0.50626 0.30980
White 8 9 1.634 0.1084
0.03369 0.06408
Black 48 11 0.5258 0.6013
0.52989 0.29417
Hispanic* 5 9 1.801 0.0776
-
dt_2** 5.64298 2.26699 -2.489 0.0161

Table 1, as shown above, is the regression for the average math score of 8th graders for all

states between the years of 2003 and 2013. Log Teacher Pay, which is the log of the average pay

of teachers was not found to be statistically significant, as denoted by the p-value .8455, which is

well above the threshold of significance (.1 for 10% significance level). This is an intriguing

find, but not unprecedented, as Dr. Hanushek also found no significance between teacher pay and

student outcome in his 1986 and 1997 research studies (Hanuskek 2). With a coefficient of 3.53,

it can be estimated that a one unit increase in teachers pay can result in a .0352 change in

students mathematical scores (.01 * 3.52). However, as previously stated, this relationship was

found to be statistically insignificant in the regression analysis. In addition, the variable Log of
Real Median Income for the state also was found to be statistically insignificant. This is not

surprising, considering that the Real Median Income of a state would have an indirect

relationship with students mathematical test scores. I wanted to look at the aspect of real median

income with regards to the average income of teachers, and see if there were any significant

differences present. However, teachers pay was not found to be significant, so its expected that

real median income would also be insignificant. The variable Bachelors Degree Math

represents the average test score of students with a teacher who currently has a Bachelors

degree. Now, for perspective, all teachers must have a bachelors degree to teach; this was

included mainly as to offer a control group for the next variable, Masters Degree Math which

represents the average mathematical test scores of 8th grades with a teacher currently having a

Masters degree. I wanted to observe any noticeable change between students test scores with

teachers holding a Bachelors degree and a Masters Degree; is there a difference based on the

level of education (and possibly perceived quality). However, neither of the two variables were

statistically significant. In addition, I also looked at the demographic makeup of the public-

school system by state to observe any differences between the top three student populations (the

three being white, black, and Hispanic). I looked at the percentage of the racial makeup of each

state: in other words, the percentage of white, black, and Hispanic children in public schooling

within that state. If the race of a student has any effect on their education, there is a strong

possibility that a learning barrier is present, therefore meaning that teachers are not necessarily to

blame for lower test scores. My findings indicated only one significant relationship between the

three main races, with that being Hispanic. The p-value for the variable Hispanic was .0776,

which indicates its significant only at the 10% significance level. The relationship is a positive

one, which is interesting to find, because I thought there might be a steeper learning curve based
on differences in language and culture. However, a one percent increase in the Hispanic

population of a school system results in a 1.456-point increase in the average math score of the

state [.0052 (.52 *.01) * 280 (mean math score)]. This could possibly be the result of an increase

in effort of Hispanic students, as they attempt to integrate into American culture. Its difficult to

ascertain effort though just based on the performance of test scores. With regards to the Wald

test, which tests the joint significance of time dummies, the p-value observed was .044,

indicating that time dummies are necessary for the regression.

Table 2

Coeffici Std. P-
Variable Name ent Error t-ratio value
Constant*** 259.204 95.7464 2.707 0.0092
Log Teacher Pay 5.4071 12.9 0.4192 0.6769
Log Real Median -
Income 27.9323 16.7223 -1.67 0.101
0.10244
White** 0.20909 9 2.041 0.0465
-
0.07056 0.03570
Black* 1 13 -1.976 0.0535
0.62298 0.25945
Hispanic** 9 7 2.401 0.02
Bachelor Degree 0.20960 0.15453
Reading 1 2 1.356 0.181
Masters Degree 0.13690 0.12998
Reading 8 2 1.053 0.2972
-
0.58719
dt_2 4 1.2714 -0.4618 0.6462

Table 2 reflects the regression of 8th grade reading assessment scores by state between the

years of 2003 and 2013. Again, I used the variables of Log Teacher Pay and Log Real Median

Income to see if there was a relationship between teachers pay and test scores, and to see if the
real median income of the state has any indirect influence on test scores. However, both were

statistically insignificant as denoted by their respective p-values of .6769 and .101 (neither meet

the threshold of even a 10% significance level). The variables Bachelor Degree Reading and

Masters Degree Reading were also found to be statistically insignificant, meaning that there is

no relevant difference in test scores between students who have an instructor with a Masters

degree versus a Bachelors degree. This was surprising to find, considering that Dr. Hanushek

found this very factor to be a key influence in perceived quality, as noted by improved test scores

of students taught by instructors with Masters level education or above (Hanushek 1).

An interesting finding for the 8th grade reading test scores is that all student races were

deemed to be significant; in contrast, only one was found to be significant for math test scores.

Both white and Hispanic were significant at the 5% significance level, as denoted by both p-

values being less than 0.05. Black was significant at the 10% significance level, as denoted by

the p-value being less than .1. The mean reading score was 263.7; using this information, we can

conclude that a one percentage increase in white, black, and Hispanic students in public-school

systems will result in a .55-point increase, -.18-point decrease, and 1.64-point increase in state

average test scores respectively. These results are surprising, considering that there appears to be

no language or cultural barrier present with Hispanic students, even though there appears to be a

slight barrier present with black children. In addition, the Wald-test for joint significance of time

dummies had a p-value of .046, indicating that time dummies are needed to accurately reflect

results.
Data

Most of the data that I collected was gathered from the Nations Report Card website,

which works closely with the National Assessment of Educational Performance. In addition, the

National Center for Education Statistics works with the Nations Report Card to find more

specific data, based on certain parameters, such as average test score, year, jurisdiction, etc. For

my data, I observed the average 8th grade math and reading test scores for each of the 50 states,

plus the District of Columbia, over the years of 2003 and 2013, with two year intervals present

between each time period (2003, 2005, 2007, etc.); in total there were six time periods observed

for each state. I also looked at the demographic makeup of each states public-student

population; however, this data was only available for the years of 2003 and 2013.

Limitations

As with all research, there are some limitations to the depth of information that can be

gathered. As mentioned previously, some of the data was not available for every year. For

instance, the average test score for both reading and math, based on teacher education level

(Masters versus Bachelors in my regression) was not available for the year 2003. In addition,

the demographic information showing the percentage of the top three races present within public
school systems was only presented for the years of 2003 and 2013. In addition, my data source

did not provide any information regarding other races and ethnicities, such as Native American,

Asian, etc.

With regards to my regression, there are certain issues that presented itself when

gathering research. There were other variables that I would have liked to include, but the data

just wasnt there to observe. Some things, like cultural and language barriers, are hard to

quantify, and cannot be observed just through differences in test scores. Therefore, there is a

strong likelihood that omitted variable bias is present, simply because the learning environment

that can influence test scores is too broad and difficult to quantify. Things like effort and

participation in schooling cannot truly be quantified; both can significantly impact students test

scores as well.

Furthermore, including the Bachelors Degree average math and reading test scores

might have caused imperfect multicollinearity, since all teachers are required to have a

Bachelors degree anyway. As I stated before, I mainly included this to act as a control group to

see if teachers who have Masters degree had students who performed better or not.

Also, teacher quality is extremely hard to quantify; researchers in the past and myself use

standardized test scores as a metric for inherent teacher quality, but there is so much more that

goes into being a great teacher. Effort, enthusiasm, willingness to work with students on an

individual basis all factor in to the overall quality of a teacher, but each are impossible to

quantify.
 References

Loeb, S., & Page, M. E. (n.d.). EXAMINING THE LINK BETWEEN TEACHER WAGES AND
STUDENT ... Retrieved November 3, 2016, from
http://cepatest.stanford.edu/sites/default/files/loebpage.pdf

Hanushek, E. A., Kain, J. F., Rivkin, S. G., (n.d.) DO HIGHER SALARIES BUY BETTER
TEACHERS Retrieved November 3, 2016 from
https://www.utdallas.edu/research/tsp-
erc/pdf/wp_hanushek_1999_higher_salaries.pdf.pdf

Dolton, P., Marcenaro-Gutierrez, O. (n.d.) TEACHER PAY AND PUPIL PERFORMANCE

Retrieved November 3, 2016 from
http://economicpolicy.oxfordjournals.org/content/economicpolicy/26/65/5.full.pdf

2015 Mathematics and Reading Assessment. (n.d.). Retrieved November 12, 2016, from
https://www.nationsreportcard.gov/reading_math_2015/#mathematics/state?grade=4

NAEP Data Explorer. (n.d.). Retrieved November 13, 2016, from

http://nces.ed.gov/nationsreportcard/naepdata/report.aspx?p=1-MAT-2-
20153,20133,20113,20093,20073,20053,20033,20003,20002,19963,19962,19922,19902-
MRPCM-TOTAL-NT,PR-MN_MN-Y_J-0-0-5

Percentage distribution of enrollment in public elementary and secondary schools, by

race/ethnicity and state or jurisdiction: Fall 2003 and fall 2013. (n.d.). Retrieved
November 13, 2016, from http://nces.ed.gov/programs/digest/d15/tables/dt15_203.70.asp