Teacher pay in a competitive market: A hedonic wage estimate for charter schools in New Orleans

Abstract

We investigate how large-scale expansion of charter schools and deregulation of teacher employment in New Orleans influenced teacher compensation. Decentralized and deregulated teacher hiring by independent charter managers is hypothesized to improve efficiency by aligning teacher incentives with goals for school improvement. In practice, charter schools might lack motivation, resources, or budget flexibility to substantially differentiate pay. The New Orleans Public School System (NOPS) is the only US school district in which the charter sector dominates teacher employment. Using data from a period when the share of teachers employed by charters increased from 70 to nearly 100 percent, we estimate hedonic wage models based on teacher attributes, training and experience, teaching assignments, and individual performance measures. We find mixed evidence regarding the efficiency of charter compensation relative to typical district contracts. At hiring, charters value masters degrees, specialized training, and pre-service work experience but not formal teaching certificates. Starting pay varies with external labor market conditions, and returns to experience are non-linear, with higher gains in early years of employment. Salary gains for teaching challenging courses, improving student proficiency, and test score growth are significant but small, and the use of supplemental pay and performance bonuses is not widespread.