Merit Pay Systems as a Reform Measure
Michigan State University
Merit pay systems reward employees in proportion to their talents, skills, and
efforts (Desander, 2000). A new wave of attempts at merit pay in the field of education
function as yet another reform effort aimed toward the bottom line of improving student
achievement. A number of different components work together to form a somewhat
successful merit pay system. Yet even a well developed system tends to fall short of its
desired outcomes. The complexities of teaching and learning fail to lend themselves to
such a pay scheme no matter how detailed the plan.
Evolution of the merit pay system
Typically, school systems use a single salary schedule to pay teachers. The
development of this schedule in 1921 helped to resolve the salary inequities experienced
by women, minorities, and elementary teachers (Odden, 2001). Years of experience
coupled with degree level determine an individual’s placement on the single salary
schedule. In general terms, the concept of merit pays refers to “…any device that adjusts
salaries or provides compensation to reward higher levels of performance” (Ellis, 1984).
Merit pay policies give employees extra compensation above the base salary for work
and contributions that exceed pre-established criteria, often which include increased
student scores on standardized tests (Ramiriz, 2001). The current emphasis placed on
educational reform spawned the revival of the merit pay system which first appeared in
1908 in Massachusetts. Under accusations of ambiguity, favoritism, and inequity, the
plan died, only to appear again during the 1920’s as a result of scientific management, in
the 1960’s with the launching of Sputnik, and again in the 1980’s after reports like A
Nation at Risk (Desander, 2000). In 1999 at the third National Education Summit, the
governors and business leaders in attendance vowed to set up competitive salary
schedules tying teacher salaries to student achievement and increase salaries for
professional development only when based on standards linked to student learning (Holt,
2001). Because these individuals view the educational transaction as a simple interaction
between teacher and student, they believe improvement results from reconstructing the
teacher by encouraging, through an incentive of more money, the acquisition of new
skills (Holt, 2001). Critics of the single salary schedule view experience and educational
attainment as irrelevant (Ramirez, 2001). Research shows that the advantage of
experience diminishes after the first four or five years of teaching, and that increased
educational attainment does not necessarily translate into increased effectiveness
(McCollum, 2001). The critics say outcomes matter most and should determine teacher
rewards (Ramirez, 2001).
The No Child Left Behind law passed in January 2002 by President Bush requires
each state, beginning no later than the 2005/06 school year, to administer annual
standardized tests to all third through eighth grade students. These tests results help to
determine yearly adequate progress with those schools failing to make progress
responsible for the consequences. This change in the law opens the door for merit pay
systems as a way for school systems to use student test scores to reward teachers with an
increase in pay (Glenn, 2002). Laws like No Child Left Behind force schools to make
incredible gains in a short time frame. Odden (2001) argues that the current single salary
schedule conflicts with today’s reforms goals aimed at doubling and even tripling student
proficiency. Private business, however, has demonstrated the ability to raise performance
levels and many of those companies use a compensation system aligned with their
organizational strategies rather than one based on seniority. The utilization of a more
strategic compensation structure allows schools to tie teacher pay to education reform
goals and strategies (Odden, 2001).
The merit pay system serves many purposes with an ultimate goal of improving
student achievement. Supporters believe it holds teachers accountable and provides the
necessary incentive for superior teacher performance that results in quality instruction
Objectives met by a merit pay system
Merit pay or performance-related pay aims to recruit and retain employees as well
as motivate them to work at their peak performance level (Chamberlin, Wragg, Haynes,
& Wragg, 2002). A study conducted by Jacobson (as cited in Chamberlin et al., 2002)
found that school districts that paid attractive salaries to teachers in mid-career
experienced low rates of turnover. By rewarding employees for peak performance,
organizations utilizing merit pay attract a large number of individuals to their applicant
pools. Jacobson (as cited in Chamberlin et al., 2002) established that school districts in
New York offering more money than neighboring districts attracted higher quality
applicants. Eberts, Hollenbeck, and Stone (2002) studied a school that implemented a
merit system in order to increase student retention and, as a result of increased retention,
increase achievement. Another supposed benefit of merit pay systems lies in the idea that
this type of pay schedule makes employees more aware of and more committed to
organizational goals (Chamberlin, et.al., 2002). When employees meet goals important
to the organization, they receive additional compensation. Some merit systems provide
additional compensation to teachers working in high poverty areas or in subjects plagued
by teacher shortages (Keller, 2004). The merit pay system addresses the public
perception that teachers refuse to offer up anything for a salary increase (Keller, 2004).
Voters may possibly approve a tax referendum if school districts force teachers to
demonstrate efficiency and effectiveness in order to receive increases in pay. Without
increased tax revenue, teachers can expect to receive nothing more than the standard one
to seven percent pay increase (Keller, 2004). Georgia’s plan awards teachers not only for
student achievement but also for faculty collaboration (McCollum 2000). The merit pay
plan in place in Iowa strives to improve teacher mentoring, award bonuses to schools
meeting student achievement goals, and establish rigorous teacher evaluation systems
(Hardy, 2003). Proponents of merit pay systems suggest that they meet many other
objectives as well such as:
weakening union strength
advertising the organization’s core values
changing the culture of the organization
saving money by decreasing the number of automatic salary increments
providing a choice as to whether or not to opt for a higher work load
encouraging teachers to become involved in evaluations
building community support for local schools and teachers
enhancing job satisfaction (Chamberlin, et al., 2002)
Many versions of merit pay systems exist for those interested in this type of reform
Types of merit pay systems
Merit systems provide employees with compensation above a base salary. Some
merit systems stand alone and supplement the regular salary schedule, while others work
in conjunction with the single salary schedule so that teachers who receive high
evaluation ratings move up the scale more quickly. Some school districts require all
teachers to participate in the merit pay system while others offer it on a voluntary basis
(Ellis, 1984). The proposed plan in Denver requires an automatic enrollment of new
teachers into the merit plan while veteran teachers have seven years to decide whether or
not to participate in the new system or remain on the current pay scale (Keller, 2004).
Merit systems of the past tended to award teachers on the basis of input criteria such as
classroom management skills, preparation of lessons, knowledge of subject matter, and
instructional techniques. Most of today’s systems use output as the foundation for
additional compensation “…whereby the degree of progress in achieving specified goals
determines the amount of benefits that the teacher receives” (Ellis, 1984).
The ways in which employees earn additional money differs considerably. The
group payment scheme attempts to overcome the problem of individual performance-
related pay and rewards schools meeting accountability goals (Chamberlin, et al., 2002).
In Kentucky, the schools received the money and the staff voted on whether to share it
amongst themselves or spend it another way. Other plans single out individual teachers
for rewards (Glenn, 2002). Teachers in Douglas County Colorado employ an outstanding
teacher program in which teachers submit portfolios or other documentation to
demonstrate student improvement (Weil, 2000). Some school districts offer bonuses for
expertise such as National Board Certification (Odden, 2001). Incentive pay remunerates
teachers for helping the school district meet certain goals or solve specific problems
(Ellis, 1984). It includes taking on additional responsibilities, attending professional
development workshops, working at high priority locations, teaching in a subject short of
teachers, and even outstanding attendance. Teachers in the Douglas County Colorado
school district involved in a unique school based effort receive compensation for their
increased responsibilities based on individual school plans (Weil, 2000). Douglas
County teachers also earn bonuses for acquiring and demonstrating proficiency in skills
identified by the district as important. In Tennessee, teachers ranked highly effective by
the state receive a $5000 bonus if they move into one of Chattanooga’s high priority
schools. Highly effective teachers currently in those schools receive the bonus if they
remain at the school (Glenn, 2002). Students’ test score gains averaged over a three year
period determine a teacher’s effectiveness level. With differential staffing plans, as
salaries increase teachers take on additional responsibilities at each level of advancement
(Ellis, 1984). Responsibilities range from supervising beginning teachers, to assisting
peers, to curriculum development. With this type of plan individuals experience the
prestige that comes with a higher rank and more responsibilities. This prestige serves as
an intrinsic motivator. Differential staffing also helps lessen the likelihood of feelings of
resentment between colleagues. Those making more money take on increased
responsibilities and colleagues perceive them as “earning” the additional compensation
through increased efforts (Ellis, 1984). The knowledge and skills based approach to
merit pay enhances the professional expertise of teachers by rewarding them for meeting
certain professional standards thought to boost student achievement (Odden, 2001).
Supporters of this method taut the similarities between it and the single salary schedule
claiming that teachers with equivalent credentials receive the same compensation. Some
teachers earn more than others as evident on the single salary schedule yet no teaching
jobs pay more than others. The plan developed for use in Cincinnati incorporates
different ways to earn increased pay with an emphasis on knowledge and skills.
In Cincinnati, the school district’s administration, devoted to improving the
quality of its’ workforce while raising student achievement levels, worked in conjunction
with the union to develop a new salary schedule that included a bonus linked to school
performance and a knowledge and skills based component (Odden, 2001). Teachers are
placed in one of five performance categories: apprentice, novice, career, advanced,
accomplished. To move up teachers must know the content to be taught, understand how
students learn, and develope effective instructional and classroom management strategies.
They must ensure that every student learns. Explicit standards in these areas guide the
process so expectations as to how to move up on the scale remain clear After a fixed
number of years in the first two categories, teachers who fail to advance lose their jobs.
Principals as well as peers evaluate the teachers on the standards to determine whether or
not the teacher advances. Because principals varied in their implementation of the
performance-based evaluation system, the district chose to provide principals and peer
assessors with intensive training to perfect the evaluation system. Teachers also earn
supplements for acquiring National Board Certification, earning a masters degree in the
area in which they teach, working in an area suffering from a teacher’s shortage, and
taking on a leadership role. The school performance portion of the plan uses Ohio’s
proficiency tests as a measure with improvement benchmarks linked to the performance
goals of the district’s strategic plan. The plan went into effect for the 2002/03 school
year. Although it sounds impressive, the odds stand against a program such as this one.
Arguments against a merit pay system
Although merit pay systems exist in some form or fashion in a few school districts
across the country, numerous reasons exist to argue against such compensation systems.
Performance related pay schemes such as merit pay systems work best with the
establishment of clearly measurable outcomes. Teaching fails to lend itself to such
clearly measurable outcomes unless student test results serve as the sole criterion of
success (Chamberlin, et.al., 2002). When test results serve as the sole criterion of
success, employees neglect other important elements of the job like teaching students the
importance of responsibility or the dangers of drugs. When we compare education to
procedural tasks like assembling furniture, we neglect the crucial role of teachers in
helping students become productive citizens (Holt, 2001). Teachers may possibly
concentrate attention on students most likely to improve their test scores while ignoring
others. With a major emphasis on standardized tests, the long-term overall goal of
improving student learning tends to fall to the wayside. Student performance on a
standardized test measures more than just the responses of an isolated individual but of
the entire school system at that moment as it impinges on the student (Holt, 2001).
Merit pay systems lean toward the subjective side making them unreliable. The
performance of the student depends on factors outside of a teacher’s control like whether
or not the students eat breakfast, whether or not they participate in extra-curricular
activities, and whether or not they relate well with other students. Teacher performance
depends on extraneous factors that include the amount of time devoted to preparation, a
sense of ownership of the subject matter, the tone of the class and school, and their
understanding of the curriculum (Holt, 2001).
Herzberg’s study of employee motivation explains that factors such as good
working conditions and salary fail to promote psychological growth. Based on this
information, Jacobson concluded it more productive to improve intrinsic rewards of
teaching like recognition of the value of teachers’ work and the amount of class time
devoted to students rather than provide extrinsic rewards such as increased pay
(Chamberlin, et al., 2002). Vroom’s expectancy theory states that prospective rewards
motivate employees only if they believe that working harder leads to improved
performance and greater rewards and they are attracted by the idea of more money.
Because of the multifaceted relationship between teachers’ efforts and results, factors that
include overcrowded classes and poor resources may demoralize teachers and prevent
them from gaining anticipated performance-related rewards (Chamberlin, et al., 2002).
No conclusive findings exist to prove that performance-related pay leads to
improved motivation, or retention and recruitment of high quality staff. Salary affects
recruitment but not the choice of teaching as a career (Chamberlin, et al., 2002). The
merit pay plan rewards certain goals over others. A problem arises when individual
teacher goals fail to match the goals of the school. Teachers also experience difficulty
meeting expectations for teacher performance when those expectations are numerous,
vague, or conflicting (Chamberlin, et al., 2002). When evaluations serve as the
determinant for merit raises, teachers may find it difficult to discuss problems with
supervisors who conduct the evaluations. They may even play up to the evaluation in
order to receive the reward making it difficult for supervisors to obtain a true picture of
the teacher’s capabilities (Chamberlin, et al., 2002).
Cost functions as a deterrent to the implementation of merit pay systems.
Evaluations work to determine whether or not individuals deserve a raise. The expense
lies in the money distributed to teachers as well as in the cost of administering the
evaluation process used to determine who receives pay increases. Evaluating
performance requires meetings, lesson observations, and other administrative costs. The
costs will be realized either in the salaries of additional staff hired to complete the
evaluations or in the cost of other worthwhile activities left undone (Chamberlin, et al.,
2002). The constant shortage of funds in the public K-12 schools differs from the private
sector where customers bare the costs of raises provided to those employees (Chamberlin,
et al., 2002). The imposition of quotas that limit the number of teachers eligible for the
raises in order to cut costs hurts teacher morale. The use of a merit pay system as a
reform measure to improve student achievement contains many pitfalls as evident by the
number of concerns addressed above.
In today’s environment of educational reform, merit pay functions as another
avenue of reform aimed at pushing teachers to increase student achievement to levels of
near perfection. Although merit pay at first glance appears as a quick fix to assist school
districts in meeting the daunting goals of No Child Left Behind, its past failures serve as
testimony to its ineffectiveness. Most districts discontinue using the merit system within
six years (Chamberlin, et al., 2002). The information presented by Newmann (1996) and
Berends (2002) in their respective books on education reform prove that factors such as
school culture, leadership, communication, participatory decision making, and a
commitment to intellectual quality determine whether or not reform measures chosen to
improve student achievement actually work.
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Complexities student test
of Teaching results
Merit pay fails to lead to increased student achievement due to the many variables that
affect the outcome of a merit pay system.