Working Paper Explores Incentive Design from the Perspectives of both Employer and Employee

NCPI director Matthew G. Springer and affiliated researcher Lori L. Taylor of Texas A&M University study incentive pay design resulting from recent educator compensation reform in Texas. They examine the preferences and effects of design features not only from the perspective of the employer—by looking at changes in teacher productivity and retention—but also from the perspective of the employee—by investigating the nature of incentives teachers design for themselves.

Springer and Taylor find that, when given the opportunity, teachers tend to design group-oriented incentive pay plans that use egalitarian award distribution. The plans offer weak incentives that do not appear to have induced any significant increases in student test scores, though the award amount of performance bonuses was correlated with teacher turnover. Both the receipt and size of a bonus award had a moderate impact, with the probability of turnover falling as the size of the award grew.

Please visit in the near future to view the final paper.