Report Points to Risks of Merit Pay for Teachers

Merit-pay plans for teachers may be growing more popular with politicians, but a report released today argues that such compensation plans are rarely used in the private sector and can sometimes bring about unintended negative consequences.

During the 2008 presidential campaign, both President Barack Obama and his rival, U.S. Sen. John McCain, endorsed the idea of performance-incentive plans that would tie teachers’ pay to their students’ scores on standardized tests. Mr. Obama’s proposed fiscal 2010 budget, in fact, calls for boosting spending on the Teacher Incentive Fund, a program that awards grants to school districts to devise performance-pay programs, to $517.3 million, up from $97.3 million in the current year.

But in "Teachers, Performance Pay, and Accountability," the report published today by the Washington-based Economic Policy Institute , researchers point out that such pay plans are less common in the private sector than their proponents sometimes claim. According to the report, only one in seven workers in the private sector is covered by bonus or merit-pay plans, and most of those workers are in the real estate,...