Teacher Incentives and Student Achievement: Evidence from New York City Public Schools

Merit pay for teachers remains a volatile issue, and this NBER working paper does little to quench that fire. It evaluates the efficacy of New York City’s high-profile performance-pay program, conducted in 200 high-needs schools over three years. Overall, it finds no effect of teacher performance pay on student achievement. Yet these results are misleading. Unpack them and find some eyebrow raising concerns: First, performance bonuses were awarded to schools to divvy up amongst their staff, not to specific teachers. Over 80 percent of the schools distributed the bonuses equally, muting the ability of such rewards to incentivize quality instruction or distinguish good from mediocre (or worse). Second, the vast majority of schools in the study were awarded bonuses: More than three-quarters qualified for the maximum payment in the second year. Third, the performance measure used was enormously—and unnecessarily—complex, providing teachers with minimal agency over their final scores. Far from representing a bold experiment with pay for performance, this scheme closely resembles the status quo: The majority of teachers are considered highly effective by the system no matter how their students perform. Mayor Michael Bloomberg traded major concessions on early retirement to convince the UFT to try pay for performance. Unfortunately, and despite the publicity afforded Fryer’s paper, this expensive effort has little to say about how a well-designed compensation system might incentivize teachers to be more effective—or how it might attract stronger teachers to the profession.

Roland G. Fryer, “Teacher Incentives and Student Achievement: Evidence from New York City Public Schools” (Washington, D.C.: National Bureau of Economic Research, March 2011).