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Investing in Higher Quality Teachers Yields Economic Returns

Via Dr. Mankiw:

Eric Hanushek's work popped up earlier this month in our blog discussion of how the U.S. isn't producing enough smart kids and how spending more on teachers might boost our kids' math scores. Dr. Hanushek now offers a new paper that quantifies the economic good that may come from hiring better teachers.

According to Hanushek's research, an above-average teacher working with a class of twenty students creates $400,000 in additional student future earnings. Replacing the least effective teachers with just average teachers nationwide would add $100 trillion of value.

I welcome suggestions as to how we identify and recruit higher-quality teachers. But free market rules suggest that attracting quality is relatively straightforward: you get what you pay for. As I apply for jobs that pay $60K rather than $30K, I get the impression that I'm up against a tougher talent pool.

So just imagine: Suppose South Dakota raised its average teacher pay by $10,000 (which would vault us in our national ranking from dead last in teacher pay to 41st place). Suppose that pay boost drew and kept some better talent. If that increased incentive to enter the field replaced only one out of 40 average teachers with above-average teachers, we'd break even on our investment.


  1. Michael Black 2010.12.21

    Cory, I bet that a $20,000 a year job will be very hard to come by. With benefits...much harder.

  2. Todd Gray 2010.12.21

    Paying a teacher more is not going make kids smarter. How about ending the public school monopoly?

  3. caheidelberger 2010.12.21

    What monopoly? Anyone can start a private school or do home school. It only looks like a monopoly in South Dakota because the free market cannot and will not effectively provide education for our rural population. Public education is vital to South Dakota and democracy. How much are you willing to pay for a healthy democracy?

  4. Todd Gray 2010.12.21

    Yes, anyone can start private school or home school yeah thats great, but until the unfair competition of the public school is ended many people cannot afford private school or home scool versus a "Free" education system. Create a voucher system so homeschooling parents and private schools are able to equally compete with the tax funded public schools.

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