Unions, Salaries, and the Market for Teachers: Evidence from Wisconsin
101 Pages Posted: 2 Apr 2017 Last revised: 23 Oct 2017
Date Written: October 23, 2017
Studying teachers’ labor demand and supply is challenging due to a lack of variation in pay. This paper exploits the passage of Wisconsin’s Act 10 in 201 to study the effects of changes in pay on teachers’ labor market, and on the composition of the teaching workforce. After the passage of the Act some districts introduced individually-negotiated salaries, whereas other districts continued using seniority-based salary schedules. I first document an increase in salary dispersion in individual-salary districts, and show that it correlates with teacher value-added. I then quantify the effects of these changes on teachers’ composition: I find a 34 percent increase in quality of teachers moving from salary-schedule to individual-salary districts, a 7 percent decrease in quality of teachers exiting individual-salary districts, and a 1.5 percent overall increase in teacher quality in individual-salary districts. Building from this reduced-form evidence, I estimate the parameters of teachers’ labor supply and demand using a two-sided choice model. Simulating the model on different salary schemes shows that an increase in the quality component of salaries in one district is associated with an improvement in average quality of the teaching workforce, driven by both in-movements of higher-quality teachers and out-movements and exits of lower-quality teachers. An increase in all districts is, however, associated with a smaller improvement, entirely attributable to exits of lower-quality teachers.
Keywords: Teachers, Unions, Salaries, Pay-for-performance, Teacher Selection, Teacher Retention
JEL Classification: I20, J31, J45, J51, J61, J63
Suggested Citation: Suggested Citation