Does merit pay for teachers produce better student achievement or retain more-effective teachers?
Performance-pay policies have been tried at many different points in the last several decades. Most offer monetary bonuses to teachers who boost student scores, participate in professional development, or meet other criteria, but they do not change base pay.
The literature on performance pay is vast, and a full review lies outside the scope of this paper. Scholars say that the research questions around performance pay are hard to answer in just one study, especially since the questions vary. Do the programs encourage teachers to work harder and make them more effective at raising scores? Do they serve as a recruitment incentive, attracting high-quality teachers, over time changing the composition of the teacher workforce? Until recently, most of the research has focused on only the first question.
Conclusions culled from random-assignment experimental studies, the research “gold standard,” are limited. One review found just nine studies that used a random-assignment or quasi-experimental method to determine whether bonus programs raised scores; some of the studies looked at performance pay in countries outside of the United States. Those studies, in general, showed positive effects, but may not be applicable to the U.S. school system.
In 2010, researchers at the National Center on Performance Incentives at Vanderbilt University released the results of a three-year experimental study on merit pay in Nashville middle schools. Under the experiment, math teachers who increased student scores received a significant bonus of up to $15,000. The study found no effects on achievement outside of 5th grade. Its authors concluded that the program had done little to change teacher practices.
Also in 2010, preliminary results from a random-assignment experiment in Chicago on the Teacher Advancement Program, which includes merit pay as well as other features such as modified professional development, found no effects on achievement or teacher- retention rates. 
A handful of other quasi-experimental studies have been mounted to study school reform plans that contain a performance-pay element. Using a method to create “synthetic” comparison schools, one study found apparent benefits for students whose teachers participated in the Teacher Advancement Program, a finding that stands in contrast to the Chicago experiment.
Teachers participating in the pay-for-performance component of Denver’s comprehensive ProComp teacher-compensation plan also appeared to boost achievement under certain conditions. The program requires teachers to set achievement goals with their principals. Those teachers who wrote the highest-quality objectives were associated with higher student achievement in elementary, middle, and high school than teachers who wrote lower-quality objectives.
However, a comparison of schools participating in the pilot program with those not participating found mixed effects from the program.
Factors such as the size of the bonus, the number of teachers permitted to receive it, and the methodologies used to award the pay all seem likely to shape the effects of such programs.
It can be said:
In the United States, merit pay exclusively focused on rewarding teachers whose students produce gains has not been shown to improve student achievement, though some international studies show positive effects. Research has been mixed on comprehensive pay models that incorporate other elements, such as professional development. Scholars are still examining whether such programs might work over time by attracting more effective teachers.
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