NCLBlog welcomes guest blogger Larry Mishel, President of the Economic Policy Institute.*

Thanks to the NCLBlog for letting me borrow some electronic real estate to add some analysis to the question of teacher pay and benefits. In 2004 I did a book with Sylvia Allegretto and Sean Corcoran called “How Does Teacher Pay Compare?”. We found that teacher pay had eroded relative to that of comparable workers (those in comparable occupations or those similarly educated, experienced etc.) so that by 2003, teachers earned roughly 14 percent less per week than these workers. Teacher benefits (defined as insurance, pensions and payroll taxes such as Social Security) were higher, but this didn’t change the picture much because benefits are only about 20 percent of compensation. If teacher benefits were reduced so that they were the same share of compensation as for other professionals, this would still leave teachers at a 12.5 percent disadvantage in terms of overall weekly compensation.

I have updated our calculations on benefits (see original here) with BLS data for June 2006.

Shares of Total Compensation for K-12 Teachers and Professionals, June 2006

Source: Larry Mishel, EPI**

A few points:

1. It seems to me that one wants to look at the complete picture of wages and benefits. In particular, the starting point is that teachers are paid less than comparable workers, something that is both true and common sense to most people (excepting my old friend, Michael Podgursky, and his followers. I do not find Podgursky particularly persuasive. See our debate with Podgursky and the book). Simply put, because teachers earn less salary, a dollar in benefits will count as a larger share of teacher compensation than it will for other professionals. So comparing the cost of benefits as a percentage of these uneven salary bases or total compensation can be rather misleading.  That is, if we raised teacher wages by 14 percent, then teacher non-wage benefits would comprise essentially the same share of compensation as among professionals.

2. Michele is right that one of the reasons that teacher insurance costs are higher as a share of compensation is that these benefits are year-round by nature while teacher wages are for about 9.5 to 10.0 months. This explains much of the "health gap" (ignoring point #1). If you adjust the teacher share by 10/12, assuming teachers work 10 of 12 months, then the teachers’ share is 8.2% versus the professional share of 7.6%, not really a gap worth writing about. This implies, of course, that teachers get health coverage during their unpaid leave in the summer, though the whole topic of ‘summers off’ and hours worked is quite nettlesome.

3. The Ed Sector’s Frozen Assets report and NCEE’s Tough Choices or Tough Times suggest that reducing pension benefits can fund large increases in teacher wages. Frozen Assets relies on Podgursky’s calculations of pensions as a share of salaries (see point #1!). However, an analysis of teacher retirement must also include social security because some teachers don’t get social security (which is why payroll taxes for teachers are a lower share of compensation, conveniently ignored by many analyses). When payroll taxes and pensions are combined they comprise the SAME share for professionals and K-12 teachers: 11.5 percent. Even if you believed that the comparison of pension costs alone was decisive, the difference would be sufficient to raise teacher wages by just 1.7 percent ((6.1-4.8)/78.5), if you do not get this calculation make a ‘comment’ and I will explain). Tough Choices claims that it can cut employer contributions to retirement in half and save 6% of salaries—this is simply off the charts.  Tough Choices makes no comparison between the retirement costs for teachers and other professionals.

4. As for sick days, personal days and so on, it is interesting to note that paid leave for teachers comprises 5.1 percent of compensation while professionals receive 7.5 percent of their compensation in paid leave. Talking about particular types of paid leave in the absence of the overall picture seems, well, not appropriate.

* The AFT provides some support to EPI, and AFT President Ed McElroy sits on the EPI Board of Directors.

** Technical Notes: Analysis of BLS data found at: EMPLOYER COSTS FOR EMPLOYEE COMPENSATION—JUNE 2006, Table 2. Employer costs per hour worked for employee compensation and costs as a percent of total compensation: Civilian workers, by occupational and industry group, June 2006.  I calculate W-2 wages because this is the definition of wages that non-technical folks have and also because it parallels the wage measures found in other data sets like the Current Population Survey.