Beyond Anecdotes: The Evidence About Financial Incentives And Teacher Retention

** Also posted here on "Valerie Strauss' Answer Sheet" in the Washington Post

Our guest author today is Eleanor Fulbeck, who earned her Ph.D. in education policy from the University of Colorado at Boulder in 2011, and is currently a post-doctoral fellow at the University of Pennsylvania.

A couple of weeks ago, an article in the New York Times, written by reporter Sam Dillon, took a look at the new incentive program being used by the District of Columbia Public Schools (DCPS). Under this plan (called “Impact Plus”), teachers rated “highly effective” by the district’s new evaluation system are eligible for large cash bonuses and/or permanent salary increases.

Dillon notes that, “The profession is notorious for losing thousands of its brightest young teachers within a few years, which many experts attribute to low starting salaries and a traditional step-raise structure that rewards years of service and academic degrees rather than success in the classroom." He also profiles several teachers who received the bonuses, most of whom say it played a role in their decision to remain in the classroom.

Putting aside these anecdotes and characterizations of “experts’” views, the idea that financial incentives – such as bonuses for performance or teaching in hard-to-staff schools – is a key to boosting teacher retention is a complex empirical question, and an open one at that.

While some turnover is expected and may even be beneficial, extensive teacher mobility - the rate at which teachers leave the profession and/or switch schools and districts - can undermine policy efforts to develop a high-quality workforce. Although there are many reasons behind teacher turnover, prior research suggests it may be due – at least in part – to dissatisfaction with low salaries (Ingersoll 2001). Thus, increases in compensation may increase job satisfaction and improve teacher retention.

Several studies offer evidence supporting this view (Imazeki, 2005; Ingersoll, 2001; Kirby et al., 1999; Lankford, Loeb & Wyckoff, 2002; Podgursky, Monroe & Watson, 2004). For example, Kirby et al. (1999) found that a $1,000 increase in salary was associated with reduced attrition  by approximately three percent overall and six percent among Latino and African American teachers in Texas. Similarly, Ingersoll (2001) found compensation for advanced teachers (those with a master’s degree and 20 years or more of experience) also had a small but significant positive impact on teacher retention. After controlling for teacher characteristics, he found that a $1,000 difference in compensation was associated with a decrease of three percent in the odds of voluntary teacher departure.

Based on this evidence – that teachers who earn more are more likely to stay – proponents of alternative teacher compensation programs argue that financial incentives will yield improved teacher retention.

Yet there is reason to question this assumption, since there are many differences between uniform salary increases and the potential to earn additional pay through financial incentives.

Unlike uniform salary increases, financial incentives are:

  • based on an economic model that assumes teachers make career decisions in response to money;
  • not guaranteed from one year to the next, unless they are awarded as permanent raises, and thus may not appeal to teachers if they are risk-adverse;
  • potentially insulting to teachers (particularly incentives that are performance-based) because they can be taken to imply that teachers are withholding improvements to student learning and performance for higher pay;
  • possibly ineffective (particularly those that are performance-based) if teachers don’t know what more they can do to increase student performance or meet other outcomes to which incentives are attached;
  • and bound to raise delicate questions of fairness between teachers and of trust between teachers and districts.
Given these substantial differences, it is not clear that increased compensation via financial incentives will yield improved teacher retention, or at least not in the more straightforward way in which higher salaries proper are associated with improved retention.

DC’s alternative teacher compensation program, which was profiled in the aforementioned New York Times article, has not yet been evaluated to determine the program’s effects on retention, student performance, or other outcomes of interest. There is, however, some evidence from other programs, which we might review in order to better understand the potential effects of financial incentives on whether teachers stay.

Mathematica’s most recent evaluation of Chicago’s Teacher Advancement Program (TAP), which includes data from two years, found no difference in teacher retention at the district- or school-level as a result of TAP.

Stanford University's Policy Analysis for California Education (PACE) and the Center for Education Policy Analysis (CEPA) recently released their evaluation of first year outcomes from the San Francisco Quality Teacher and Education Act (QTEA), which is an incentive program. They found that the majority of teachers reported QTEA did not affect their decision to stay in their current school.

There are also a few evaluations of alternative teacher compensation programs in Texas, all projects of researchers affiliated with the National Center on Performance Incentives (NCPI). These include: 1) an evaluation of the District Awards for Teacher Excellence Program (DATE) third year outcomes; 2) an evaluation of the Texas Educator Excellence Grant (TEEG) second year outcomes; and 3) an evaluation of the Governor’s Educator Excellence Grant (GEEG) one year outcomes, which did not examine retention outcomes associated with GEEG.

The results of these evaluations have been mixed.

The programs allow Texas districts and schools to set their own incentive award amounts. Perhaps not surprisingly, NCPI researchers found that there were retention gains among teachers who received large bonuses. However, they also found sharp decreases in retention associated with smaller incentives and for teachers who did not receive an incentive.

The implication of these findings is troubling: Not only is it possible that financial incentives do not affect teacher retention, but they may actually exacerbate turnover if the incentives are small or if teachers do not receive an incentive under these programs. Taken together, NCPI researchers find little evidence that districts and schools in the DATE and/or TEEG programs experienced any systematic change in overall teacher retention.

In 2010, NCPI also released their evaluation of the high-profile randomized experiment of performance-based incentives in Nashville – the Project on Incentives in Teaching (POINT). While findings indicated there were no improvements in student test-score achievement associated with POINT, the evaluation did not examine retention outcomes associated with the program.

Finally, my own research and research conducted by external evaluators of Denver’s Professional Compensation System for Teachers (ProComp) suggest small gains in retention (between 2-4%). Interview data, which I will discuss in a future post, support these findings: Although a few teachers indicated they considered ProComp financial incentives when making their career decisions, most said they did not consider the incentives to be important factors in such decisions. Rather, teachers indicated that other non-pecuniary factors, such as the principal and student characteristics, were more important considerations in their career decisions. This has been well documented in the research literature (Boyd et al., 2011; Milanowski et al., 2009).

Thus, the available body of evaluation research on alternative teacher compensation programs does not consistently suggest financial incentives improve teacher retention. In some cases incentives appear to be associated with small increases in retention; in other cases, incentives appear to be associated with decreased retention.

The majority of evaluations, however, either found financial incentives had no effect on teacher retention or did not include an examination of retention at all. Accordingly, there is little reason to assume the availability of financial incentives will result in improved teacher retention. If anything, the research to date suggests that other considerations, such as working conditions and leadership, are more important factors in teachers’ decisions to stay, move, or leave the profession entirely.

Future evaluations of alternative teacher compensation programs should include an explicit examination of retention outcomes in their design. Additionally, there is a great need for qualitative data from teachers (e.g., interviews, focus groups, etc.) to better understand the ways in which teachers consider and prioritize factors that affect their career decisions and the degree to which financial incentives may – or may not – factor into such decisions.

In the meantime, implications that incentives are certain to boost retention, as seemed to be the underlying idea in the New York Times piece about Impact Plus, are little more than speculation.

- Eleanor Fulbeck


Don't uniform salary increases also "assume teachers make career decisions in response to money"?

Unfortunately, I don't seem much of a political constituency for raising teacher salaries in a uniform way.


Incentives will only raise the stakes on standardized testing. Wasn't there a program in DCPS when Rhee was chancellor? And didn't they find an unusual ratio of wrong to right corrections on the tests?

In my opinion, the way we evaluate teachers today does little to reflect his or her true value. We need to develop a system that collaboratively measures teachers from bottom to top, meaning measures from students, parents, peers, and administrators. Basing it on test scores and a couple of lesson observations does little to get a true view of the value of a teacher. There are so many variables beyond a teacher's control that contribute to a student's performance.


Great post.


Student motivation is the most important factor in student performance. The Draft during the Vietnam War had much more impact on student motivation to study hard and get into college than teachers' influences.