Wednesday, February 27, 2013

Compensation and Pension Matters in the Case of Attracting the Best Teacher Candidates

by Alicia H. Munnell and Rebecca Cannon Fraenkel

“…Studies have shown that total compensation is roughly equal in the public and private sectors, so a reduction in pension benefits will make total compensation lower in the public sector than in the private sector… Virtually all analysts agree that wages in the state and local sector – when adjusted for the higher educational attainment of public sector workers – are lower than those in the private sector…

“To the extent that teachers start out at a pay disadvantage relative to pri­vate sector workers with similar levels of education, pension cuts for new hires could seriously reduce the attractiveness of a teaching career… Compensation includes both wages and pensions. The expectation is that the higher the compensation, the higher the SAT score at the teacher’s undergradu­ate institution…

“Ap­plicants for teaching positions value deferred com­pensation – the generosity of the public pension and Social Security – as well as the wage. This finding suggests that large cuts in pension benefits would indeed reduce the attractiveness of teaching to young applicants…

“The important finding is that compensation mat­ters in attracting people into the teaching profession. Somewhat surprisingly, benefits are as important as wages for younger teachers. Teachers may value benefits highly because they believe that they will retire in the same job, allowing them to collect the full amounts. In any event, cutting pensions will almost certainly have an adverse effect on the quality of people applying for teaching positions…

“Controlling for demands of the job and personal characteristics, state and local teacher plans that compensate teachers more generously are able to hire higher quality teachers – as measured by the SAT score at their undergraduate institution. These findings are important in a period when financial pressures are leading public sector employers to cut pension benefits.

“Since cuts for current employees are precluded under the laws of many states, most of the cuts fall on new hires. These people are not at the table; they do not have a voice. But cutting their com­pensation is not costless; it will almost certainly result in a lower quality of applicants for one of the nation’s most important jobs…

“Pensions are a part of a total compensation package, and total compensation for teachers – even before cuts – is either the same or lower than that for private sector workers with similar characteristics. So even if the pension changes are good policy, without compensating wage increases, they will diminish the total compensation that new teachers will receive, make teaching in public schools less attractive, and reduce the quality of applicants.”

from the Center for Retirement Research at Boston College



  1. Compensation and pension will also affect whether many current teachers remain in their profession.

  2. If you regard Prof. Munnell as credible, and you should, you should also be reporting what she says about the real numbers on our pension problems as opposed to the state's numbers, which you use here regularly. She says TRS has only 18% of the what it needs to meet its obligations -- roughly half of what is officially reported.

    She further says that, while other states may have manageable pension problems, we in Illinois should be "hysterical."

    Her numbers, and those of all other credible, neutral sources, show that the basic notion that "this is just a revenue problem" is flat wrong.

  3. Mark Glennon's sources are ideological rather than factual. His premise is that there is a vast retiree conspiracy to hide the precarious state of the state's pensions (as if reality wasn't bad enough). Hs suggestion that we rely on his libertarian wire points rather than the non-partisan Ralph Martire and the Center for Tax and Budget Accountability is silly. The problem for Mark, as it is for other pension cutting advocates, is that the facts have a bias in favor of the state keeping its promises and obeying the law.

    -Fred Klonsky

  4. Fred, you didn't notice that the source I cited is the one Mr. Brown chose to publish above? That's Ms. Munnell from the Center for Retirement research at Boston College. I believe she is credible and neutral, but kindly explain what is "ideological" about her. (You won't.)

    The other sources I know of who have said basically the same thing are the bipartisan State Finance Task Force headed by Paul Volker, the annual State of the State's report from last Fall, Professor Ruah at Stanford and Professor Brown at U of I. None of them is ideological to my knowledge or funded by either side (like Mr. Martire and his organization, which is heavily union-funded). If they are, please explain. (You won't.)

    I was attracted to your site by your claim to be "following the data" so I posted some the sources above an others that conflicted with your claims. You answered not with facts but with sarcasm, insults and made-up labels as you did above, like saying I'm a Libertarian (I'm not). You've done the same with others who challenge you on the facts. I concluded that you are a fraud, cannot care less about facts, and that you lie to your readers. I see that even Democratic politicians are concluding the same thing, which is why they are scraping you and your readers off, and why you are losing. I would be happy to see you lose you, personally, lose your pension, but the tragedy is that honorable teachers will lose out,too, because they are paying 9.5% of their salary into a system that is far more broke than you and the state are saying.

  5. A few of my one million blog visitors have found my sarcasm kind of endearing. Sorry that Mark is not one of them.

    -Fred Klonsky