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ERIC Number: ED535997
Record Type: Non-Journal
Publication Date: 2011-Sep
Pages: 16
Abstractor: ERIC
Reference Count: 27
ISBN: N/A
ISSN: N/A
Buyer Beware: The Risks to Teacher Effectiveness from Changing Retirement Benefits
Weller, Christian E.
Center for American Progress
The fiscal crisis in the states and localities that occurred during the Great Recession and continues in many parts of the country because of the persistent housing crisis put substantial pressure on governments to consider the efficiency of their spending. Public pensions gained substantial attention due to the need for governments to contribute additional amounts to underfunded defined-benefit pension plans when budgets were already constrained. Some observers have argued that states should take the crisis as a chance to switch retirement benefits from defined-benefit pensions to either defined-contribution or cash-balance plans. Whether average teacher effectiveness will fall or rise after switching public employees from deferred compensation under defined-benefit pensions to immediate compensation under defined-contribution or cash-balance plans will depend on the size of each of the following effects: (1) The amount of turnover; (2) The extent of the learning curve; and (3) The reaction to initial compensation changes. The interactions of these three changes in determining the effectiveness of teachers is not easy to predict. Indeed, the economic literature on teacher compensation and on pensions shows a lot of uncertainty related to each of these three factors. Researchers, however, can use simulation techniques to better understand policy changes when there is uncertainty over the size of relevant factors--as long as there is sufficient evidence to quantify the uncertainty associated with each individual factor. This issue brief summarizes the results of just such a detailed simulation. The simulations calculate the chance that the average effectiveness of teachers will decline and the average change in teacher effectiveness will fall after teachers' pensions are switched from defined-benefit plans to the two alternative retirement plans. The simulations demonstrate that changing retirement benefits carries large risks and costs with it because average teacher effectiveness could fall after a switch from defined-benefit pensions to alternative retirement benefits. Those interested in raising teacher effectiveness may be better served finding other policy levers than switching retirement benefits. (Contains 1 figure, 2 tables, and 27 endnotes.)
Center for American Progress. 1333 H Street NW 10th Floor, Washington, DC 20005. Tel: 202-682-1611; Web site: http://www.americanprogress.org
Publication Type: Reports - Evaluative
Education Level: Elementary Secondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: Center for American Progress