What is the “best” way to pay teachers? Should we continue paying teachers based only on their experience and education, or does this merely reward mediocrity? Would it be better to base teachers’ pay on their performance in the classroom or their students’ learning, or would this undermine cooperation among colleagues and encourage an unhealthy level of teaching to the test? There are no easy answers to these questions.

This report reviews the history of teacher compensation plans and begins to shed light on the effects of compensation systems on teacher behavior through a study of middle-school teachers’ responses to an alternative compensation policy, the Minneapolis Professional Pay Plan (Professional Pay). The issue of teacher compensation frequently appears on the educational policy agenda, for policy makers and school administrators often presume that the current system is ineffective and that alternatives will result in improved teacher performance. Alternative compensation systems such as Professional Pay have been proposed as mechanisms for improving teacher performance, yet attempts to implement these systems have rarely been successful.

This report discusses, among other things, some of these previous attempts.  This study was conducted in Minneapolis from 2003 to 2005 using both qualitative and quantitative methods, and inductive and deductive inferential processes. Interviews with middle-school teachers, school administrators, and district personnel and a survey of middle-school teachers are the main data sources. Several obstacles to the policy’s success emerged from the data including teachers’ limited understanding of the policy, their unwillingness to surrender their professional autonomy in order to earn financial rewards, and their limited interest in financial incentives.

But perhaps the most important and least recognized obstacle was the district’s inability to credibly commit to Professional Pay. When credible commitment exists, an employee can trust the employer to appropriately reward changes in behavior and, in the case of long-term rewards, that these rewards will persist for the duration of the employee’s tenure. Because of the ever-shifting landscape of educational policies, the pay system in Minneapolis has transformed in the few years since this research was first conducted. The current teacher salary policy is described at the end of this report. The changes in the Minneapolis compensation system that have been enacted in the last few years speak to one of the primary issues raised in this report: teachers concerns about the stability and longevity of reforms because of a lack of credible commitment on the part of the district. These concerns, in retrospect, were entirely substantiated.