Do Higher Salaries Differentially Retain High-Ability Teachers?

Abstract

Research has clearly established that increasing teacher salaries reduces overall teacher attrition. A related question is whether higher salaries differentially retain high-ability teachers. Prior evidence suggests that the answer to this question is no. In this work, I revisit this question using a large panel dataset from Texas that links teachers to their certification scores, base salary, and mobility patterns. I find that differential retention effects of teacher salaries are more complicated than past research reveals. Differential pay effects depend on teacher experience, so overall differential pay effects mask the effects that occur among experienced teachers. Increasing salaries for teachers with 3 or more years of experience differentially retains high-ability teachers, while higher salaries for teachers with 0-2 years of experience differentially retain low-ability teachers. This likely occurs because higher early-career salaries disrupt a positive sorting process that exits among novice teachers.

Keywords: Teacher Pay, Teacher Quality, Differential Retention

JEL Classification: J45, J63, J31