In this series we are looking at high quality teaching * (see the series intro here).* We know intuitively that having a great teacher is important. In this post, we examine in economic terms how much great teaching is worth. How much additional value do great teachers add to their students?

Imagine a school where teacher quality is fully observable and accurately reported every year in a district report card. (Yes, these are big assumptions, and we will come back to them.) And assume teacher quality follows a ‘normal distribution’ pattern. And let’s assume we have five first grade teachers, with the following quality ratings:

Teacher 1: Low performer (16th percentile on the quality scale, 1 standard deviation or 1σ below the mean, 84% of teachers are of higher quality than teacher 1.)

Teacher 2: Middle-Low performer (31st percentile, 0.5 σ below the mean)

Teacher 3: Average performer (50th percentile, at mean)

Teacher 4: Middle-high performer (69th percentile, 0.5 σ above the mean)

Teacher 5: High performer (84th percentile, 1σ above the mean)

(if you need a refresher course on the normal distribution curve, go here)

If you knew in advance all of the teacher quality ratings, and if UCF gave you the right to select your child’s teacher, which teacher would you choose? You would pick Teacher 5, right? But of course so would every other parent! Unless we want 125 students in a class (and four teacher with no students to teach), we could not have a teacher assignment system that allows families to choose their child’s teacher.

When there is a shortage of a desirable item, one way to allocate scarce resources is to conduct an auction. If we were to auction off the 25 seats in Teacher 5’s classroom, how much would each seat be worth? How much should you bid to get your child a seat in Teacher 5’s classroom? In order to place the right “bid”, you would need to know the impact of Teacher 5 on your child’s future.

Economists and education researchers have done this work for us, and the results are quite interesting. Research has shown that there is a direct linkage between quality teaching and the future lifetime earnings (age 25 – 65) of a student. Higher quality teachers produce students with higher test scores. Students with higher test scores have higher future earnings. (This is because tests measure cognitive ability, and cognitive ability is closely tied to work place earnings.)

To give a numerical example, researchers have shown that a teacher whose effectiveness is one standard deviation above the mean raises annual student growth by 0.3 standard deviations. And students who grow an extra 0.3 standard deviations in one year earn approximately $40,000 in additional lifetime earnings. That may not sound like a huge difference, but remember that this is the effect on a single student from only one year of having a great teacher (Teacher 5) rather than an average teacher (Teacher 3). Note that the news about Teacher 1 is just the opposite — students under Teacher 1 see diminished lifetime earnings of $40,000.

So back to our auction – How much would you pay to move your child from Teacher 3 to Teacher 5? If the research results are valid, you would pay up to $10,000 (the present value of the $40,000 of future earnings). And likewise you should be willing to pay up to $10,000 to not have your child assigned to Teacher 1, and instead stay with Teacher 3.

Now, let’s think about the total annual value one great teacher creates. With a target class size for of 25 students, a single high performing teacher could generate $250,000 per year ($10,000 x 25 students) in extra social benefit beyond that of an average teacher. And let’s not forget that the flip side also holds: a lower performing teacher takes away $250,000 in value every year. Because most of our teachers are making a 30-40 year career in teaching, we can estimate the lifetime value-added of one great teacher by multiplying $250,000 by 30 years. Wow! That is an enormous influence that one great teacher can have on our community.

Does this mean we should pay teachers according to the value they generate? Not necessarily — does a salesperson get paid 100% of the profit from the products they sell? Does a physical therapist get paid 100% of the extra wages a client earns by getting back to work after a disabling injury? Is a paramedic who provides life-saving care awarded a share of the future earnings of the patient who was saved? No. That isn’t the way most jobs are paid.

But knowing that one high-quality teacher can create $250,000 per year indicates the importance of excellent teaching. If we are not paying close attention to teacher quality in UCF, we are missing a major opportunity.

Research on this topic can be found here (easier read) and here (harder read).

Takeaways:

- Quality teaching is enormously valuable to society and to individual students
- If we had a free market for teacher services, and perfect information on teacher performance, a rational family would pay an additional $10,000 per year for their child to get an 84th percentile teacher.
- If teacher quality is so important, why don’t we pay more attention to it in the management of our schools?