An Efficiency Assessment Among Empirically Defined Labor Markets for Determining Pay for Teachers

Abstract

Fundamental to updating a fixed-rate salary schedule for teachers is the reliance on a relevant labor market containing comparisons to other school districts—that is, object school districts, which can be chosen from a policy or empirical/efficiency perspective. As such, four relevant markets having roots in neoclassical economic literature—supply and demand, economy of scale, ability to pay, and cost-benefit—served as our single independent variable, defined by a least squares sum of difference between object school districts (n = 200) and target school districts (n = 5) composing a potential relevant labor market. These districts were cast into a 5 (target) × 4 (object) randomized block design, and efficiency was assessed according to two dependent variables: entry-level salary and average teacher salary. Multivariate analysis of variance results indicate that all potential labor markets are equally efficient for entry-level pay amounts but differ according to the average salary paid teachers. Collectively, these findings have implications for establishing teacher pay amounts and increases in the field setting, from a policy perspective and for a negotiated labor contract.