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Teacher Pay: How Salaries, Pensions, and Benefits Work in Schools

A group of teachers gather outside the Senate chambers to protest Kentucky Senate Bill 1, a bill that proposes changes to the state funded pension system for teachers at the Kentucky State Capitol, Friday, March 9, 2018, in Frankfort, Ky.
A group of teachers gather outside the Senate chambers to protest Kentucky Senate Bill 1, a bill that proposes changes to the state funded pension system for teachers at the Kentucky State Capitol, Friday, March 9, 2018, in Frankfort, Ky.
—Timothy D. Easley/AP

Teacher pay has been in headlines across the country recently: Educators in Oklahoma and West Virginia successfully forced the legislature to pass pay raises in early 2018, and teachers in Arizona were demanding lawmakers there do the same.

Teaching has long been viewed as a low-paid job, but much more goes into teachers’ compensation than just the take-home paychecks.

“Although teaching is a profession, the way that teachers are paid looks a lot more like the way we pay blue-collar workers in the United States,” said Jacob Vigdor, a professor of public policy and governance at the University of Washington.

What exactly does that look like? We spoke with experts to break down how teachers are paid.

How much do teachers make?

The average public school teacher salary for 2015-16 was $58,353, according to the National Education Association, the nation’s largest teachers’ union. But teacher pay varies widely by state—in New York, the average salary is $79,152 compared to $42,025 in South Dakota. Although teachers don’t work during the summer, some school districts give teachers a choice between receiving their annual salary over the 10 months of the school year or spreading paychecks out over a full year.

Teachers are paid less than comparable workers with similar education levels, an Economic Policy Institute analysis of federal data shows. Since 1996, teachers’ weekly wages have decreased $30 per week to $1,092 in 2015, while all college graduates’ average weekly wages have increased $124 to reach $1,416. Those numbers are adjusted for inflation.

However, non-wage benefits as a share of total compensation are more important for teachers than for other professionals. Non-wage benefits can include prepaid insurance premiums and pensions.


How do teachers get raises?

Most school districts have what’s known as a “step and lane” salary schedule for teachers. These grids specify how much raises are worth. Teachers earn a “step” increase for each additional year of experience, with many teachers peaking with the highest “step” at around age 55.

Teachers can also earn more by having more education (those are the “lane” increases). Some districts pay teachers holding a master’s or doctoral degree a premium, while others move teachers into a higher pay column when they earn a certain number of credit hours of professional development.

There are about 17 states with statewide teacher salary schedules, according to the Education Commission of the States. But those schedules represent the minimum districts have to pay their teachers. Teacher salary is locally determined, which is why affluent districts often pay their teachers more than poorer districts. Typically, teachers cannot negotiate a raise outside of their district’s salary schedule.

Districts whose teachers are unionized negotiate new contracts periodically, which include revisions to the salary schedule.


What about high-performing teachers?

Some districts give teachers extra pay when their students do well academically. Past research has yielded mixed results on how those initiatives affect student achievement.

However, a recent study of 10 districts that received federal grants in 2010 found that in schools that offered pay-for-performance bonuses, students got the equivalent of four weeks of additional learning. The average bonus was about $2,000, and most teachers in the school received the extra pay.

Depending on the district, teachers who take on extra responsibilities, like serving as a team leader or a coach, can also receive an additional stipend.


How do teacher pensions work?

The majority of public school teachers—85 percent, according to 2017 data from the U.S. Department of Labor—are enrolled in what are called defined-benefit pension plans. The main feature of these plans is that they promise a specific payout to teachers upon retirement determined by a formula, rather than by investment returns.

By contrast, payouts under defined-contribution plans, such as 401(k) accounts common in the private sector, are based on each teacher’s individual investment decisions. Only 8 percent of public school teachers participate in those plans.

Each state sets the rules for its teacher-pension plan, including the following factors:

  • Vesting requirements: Teachers must teach a minimum number of years, usually between five and 10, in order to qualify for benefits. Leaving before this benchmark means they forfeit part or all of the benefit.
  • Required contributions: Most states require teachers to pay a portion of their salary into the pension system.
  • Retirement point: States set different points at which teachers can retire and begin to draw down benefits. Usually, they are based on a combination of age and years of service. For example, a “rule of 80” means that teachers receive full benefits when their age plus years of service equal 80.
  • Formula: The formula determines the benefit payout. It is typically based on the teacher’s final average salary (usually calculated over a three- or five-year period), times the number of years of service, times a multiplier.

For example, under a system with a 1.5 percent multiplier: A teacher retiring with a final average salary of $60,000 and 20 years of service would collect a pension of $18,000 annually.

Thus, what a teacher actually collects depends on when the teacher leaves the profession or chooses to retire.

Typically, pensions become more generous as teachers near the retirement point with many years of experience, which is why they are sometimes said to be “backloaded.” Teachers who move to another state or leave the profession before reaching retirement age can sacrifice significant pension wealth.

A few cities—among them Chicago, Kansas City, New York City, and St. Louis—have their own teacher-pension plans separate from those in the state.

Some states offer teachers a choice of a defined-benefit or defined-contribution plan. Other states use a hybrid plan combining features of both or enroll all new teachers in a different plan from veterans.


How do employers pay for teacher pensions?

Like other employers, school districts consider total teacher compensation by adding up salary and benefits, including pension contributions. The difference comes in what these contributions actually mean in real terms.

In 401(k)-style plans, the contributions belong to the teacher once he or she is vested in the plan. But under a defined-benefit plan, the contributions are pooled to meet the plan’s current and future obligations and are managed and invested by a board. In this way, teacher pensions are a type of deferred compensation.

Many state plans have unfunded liabilities because states have not paid enough into the system to meet all current and future obligations. This means that some of the money districts contribute to the pension actually goes toward paying down accrued debt, not benefit obligations.


Do teachers get Social Security?

Not all of them. Ten states and the District of Columbia exclude all teachers from Social Security; in a handful of others, coverage varies. About 40 percent of public school teachers, or 1.2 million, are not covered under Social Security, according to a 2014 analysis from Bellwether Education Partners.

Most of these states had pension plans that predated the creation of Social Security in the 1930s. States were offered the chance to join the program later, but not all of them did.

States that do not enroll teachers in Social Security sometimes have more generous pension plans. Nevertheless, many advocates fear that not having Social Security as a support leaves teachers vulnerable in their retirement.


Do teachers pay for health-insurance premiums?

Most teachers participate in a health-insurance plan offered by their districts. According to a 2013 analysis, insurance costs for districts are higher than for private-sector employers.

Across the nation, teachers pay on average 16 percent of the plan premiums for individual coverage, lower than the 21 percent average for workers in private industry. But for family coverage, teachers pay a comparable portion of the premium to private-sector workers, according to 2017 data from the Labor Department.

With rising health-care costs, teachers have been expected to foot more of the bill for their health care. In West Virginia, for example, rising health-insurance premiums were a major sticking point that led to the nine-day strike earlier this month. (To end the strike, the governor agreed to freeze health-care premiums and rates for 16 months until a more permanent solution could be reached.)

Compared to a decade ago, teachers are contributing nearly $1,500 more per year toward premiums, adjusted for inflation—that’s a higher increase than other state employees have had to pay, according to a Vox analysis of Labor Department data.


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