Union Reform, Performance Pay, and New Teacher Supply: Evidence from Wisconsin's Act 10
39 Pages Posted: 29 Jan 2019 Last revised: 22 Apr 2019
Date Written: April 19, 2019
This study examines the impact of performance pay on new teacher supply. Teacher compensation in most unionized public school districts is rigid and solely based on seniority and educational attainment. Collective bargaining agreements between teachers' unions and local school boards usually oppose performance pay and prohibit school districts from adjusting pay at the individual level. I exploit a recent shift toward performance pay in Wisconsin induced by the enactment of Act 10, a landmark law that severely reduced the influence of teachers' unions in the state and gave school districts the freedom to redesign their compensation schemes. Immediately following the law, roughly half of school districts in Wisconsin eliminated rigid unionized compensation schemes and moved to negotiate salaries with individual teachers based on performance. As a result, the compensation of teachers with high-value-added prior to Act 10 rose more than that of teachers with low-value-added in school districts that switched to flexible compensation. To test whether these changes in compensation impacted the quantity and the quality of new teacher supply, I compare the quantity of individuals completing a teaching degree in Wisconsin institutions before and after Act 10 and relative to those in similar states in a difference-in-differences framework. I find that Act 10 led to a 20% increase in the number of awarded teaching degrees. This effect was entirely driven by the most selective universities, which suggests that the quality of the prospective teacher pool in Wisconsin increased as a result of the union reform.
Keywords: Teachers' Unions, New Teacher Supply, Performance Pay, Salary Schedule
JEL Classification: I20, I28, J24, J31, J45, J51
Suggested Citation: Suggested Citation