Saturday, July 27, 2013

The labor market for teachers in North Carolina

Consider this teacher in North Carolina, who seeks a raise via moral suasion.

If we suppose that her husband makes as much as she does, so that they have a household income of $62,000, that puts them in the 62nd percentile of the US household income distribution and the 96th percentile of the world income distribution, according to this calculator. Even if we suppose that her husband makes only $20,000 per year (2000 hours at $10 per hour), which seems unlikely given positive sorting in the marriage market on education and income, the percentiles are 57 and 95.

There are several issues here, more than one can address in a single post. But one important one often negotiated in discussions of teacher pay is compensating differences. Many people like to teach. That drives teaching wages down, as implicitly part of the compensation is doing a job that one wants to do, and receives praise for doing from others, rather than, say, selling used cars. Teachers should make less in dollar terms than other jobs that require the same skills / investments but lack the non-pecuniary payoff. Formally, the margin teacher should be indifferent not between the money wages of their two best labor market options, but the utility levels associated with their two best options. Also, teachers in government schools, once they have taught for a while, essentially face zero employment risk. The labor market should (and likely does) price this aspect of the job as well, and it too will lead to lower teacher money pay.

I hope she finds a teaching job she likes better in another state.

Hat tip: ASAK


Sasha said...

I think we may disagree about the central argument of the post. I think the core claim is that, whatever compensating differentials there are (and she's pretty open about the fact that there are), talented people with graduate degrees are unlikely to stay in teaching at these wage rates. The idea that the average quality of teacher will fall with falling wages seems like an idea economics can get behind.

To me, the core argument is not "it'd be nice to make more money", but that with teaching, as with occupations in general, we'll get what we pay for. If someone were to argue that being a professor is a good gig and, therefore, should also only pay $31K, the objection would immediately be that we need to stop good people from leaving for outside offers that pay enough to make up for whatever utility bonus one gets from the professor job. Seems like the same applies here.

I'm also not sure that the compensating differentials argument pulls through empirically for professional jobs in general, which typically have high financial and nonfinancial rewards. Is there good evidence of tradeoff?

A notable feature of NC's public education system is that teachers are laidoff in the summer and rehired in the fall to prevent the accumulation of seniority for tenure.

As an aside, the Medicaid cap for a family of 4 in NC is $47,100 (

econjeff said...

I took the central argument to be "I got a degree and I am a good teacher therefore I should be able to live a certain lifestyle in my preferred location". That is to say, I took it as a statement of entitlement and complaint. The main point of my post was to note that the NC teacher in fact has it pretty good by most any metric. If one were going to spend tax dollars to make someone better off simply on equity grounds, she would be at least a billion people back in the queue.

My thought about what the state of NC should be doing is deciding what quality of education they want to provide and then spending the minimum number of tax dollars (taken by force from the citizenry, it is always helpful to recall) required to produce that quality. That is the state's fiduciary duty to the taxpayers when it acts as their agent in producing primary and secondary education. I lack the information required to determine whether they are doing that or not. I don't think the poster has enough information to determine that either. The fact that they are risking her departure (though not too soon, as she is apparently around for another year) does not, despite the teacher's claims, suffice to make the case.