Public opinion polls show that most Americans (including a majority of teachers) favor merit pay for teachers. Teachers' and administrators' organizations generally oppose merit pay because there is no fair way to evaluate teachers and because the merit pay issue diverts attention from the fact that all teachers are underpaid. A review of recent literature and of successful merit pay programs revealed the following widely shared beliefs and general conclusions: (1) merit awards should be added to, not substituted for, reasonable increases based on seniority, academic credit, cost-of-living, etc.; (2) most merit pay programs that fail (and most do) do so because the evaluation procedures and/or instruments are inadequate; and (3) if a merit pay plan is adopted, it must be adequately financed. The awards must be large enough to be a real incentive, and must be available to all teachers who meet predetermined criteria. Incentive pay plans, which do not presume to judge the quality of teachers but provide more pay for more work or for filling assignments deemed to be of greater importance to the district, avoid the problem of valid evaluation and may be easier to implement than merit pay. (Author/BW)