Monopsony power in the market for teachers: Why teachers should support market-based education reform

Abstract

Employers can exploit individuals with high moving costs when local labor markets are not competitive. Along with nurses and university faculty, teachers are sometimes in such a disadvantageous situation. Teachers’ price elasticity of supply may be quite low in many regions, and their geographic mobility may be low when they are their household's second wage earner. Their occupational mobility is often low because of the scarcity of alternate employers within commuting distance. Nearly 96 percent of Texas' teachers work in tax-financed school districts, and many regions have only one district. An econometric model developed from school district data from 48 South Texas and 48 North Texas counties supports the hypothesis that teachers are paid less in less competitive labor markets. In Texas, teachers’ salaries are not determined by collective bargaining between district officials and teacher unions. That relatively unique feature of Texas makes it especially well-suited to the task of disentangling monopsony effects from other labor market forces.