It's Not (Just) About the Money: Pay and the Value of Working Conditions in Teaching

This paper quantifies the extent to which teachers are “overpaid”—i.e., “earning rents”—explicitly accounting for both pay and non-wage job attributes. Using quasi-experimental designs, administrative data, and a choice experiment, I estimate the teaching rent as the sum of the pay gap and the working conditions gap between teaching and teachers' next-best jobs. A fuzzy regression kink design exploiting variation in Kentucky teaching certification shows teaching pays $18-21,000/yr (33-40% of salary) more than teachers’ next-best options. Event studies around teacher exits yield similar estimates. Importantly however, teaching conditions are relatively poor. Fielding a choice experiment to Kentucky teachers, I estimate that teachers are willing to pay 29-35% of their salary to switch to their next-best job solely for better conditions. My results indicate that teaching does not pay rents, but rather pays a large premium to compensate for poor teaching conditions. Extending these estimates to other states suggests that over $145 billion is spent annually to offset poor teaching conditions, consistent with reports of teacher shortages