Can Public Schools Buy Better-Qualified Teachers? Author(s): David N.

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CAN PUBLIC SCHOOLS BUY BETTER-QUALIFIED TEACHERS?

DAVID N. FIGLIO*

Since the early 1980s, real teacher salaries in U.S. public schools have increased considerably faster than salaries of other Americans with similar levels of education and training. Providing an important impetus for this development were claims that increased salaries would allow the recruitment of betterqualified teachers. This analysis, which uses panel data on new teachers in 188 public school districts that changed their salaries between 1987-88 and 199394, investigates whether a school district can, by unilaterally increasing teacher salaries, improve the quality of the teachers it hires, as indicated by their having graduated from selective colleges and majored in the specific subject matter they teach. For nonunion school districts, the author finds a positive, statistically significant relationship between a given district's teacher salaries and that district's probability of hiring well-qualified teachers. Several tests indicate that this relationship is not found in unionized school districts.

Since

the early 1980s, real teacher sala-

ries in U.S. public schools have increased at a rate considerably faster than those paid to other Americans with similar levels of education and training (Ballou

from the National Science Foundation, the U.S. Department of Education, and the University of Oregon Foundation. The author thanks Dale Ballou, Bruce Blonigen, Thomas Buchmueller, Caroline Hoxby, John Matsusaka, Daniel Rees, Joe Stone, Wesley Wilson, James Ziliak, seminar participants and other colleagues at the University of Oregon and University of Southern California, and participants at the 1996 Association for Public Policy Analysis and Management and Western Economic Association meetings for helpful comments or conversation. The confidential data used in this paper were provided by the National Center for Education Statistics, U.S. Department of Education.

*David N. Figlio is Walter MatherlyProfessor of Economics at the University of Florida and Faculty ResearchFellow at the National Bureauof Economic Research. This research was supported with funds

and Podgursky 1996). Much of this rapid increase in teacher salaries was fueled by such several prominent recommendations, as that expressed in the 1983 report of the in National Commission on Excellence Education, to increase salaries in order to recruit better-qualified teachers (Ballou and Podgursky 1995). The apparentwidespread begs acceptance of this recommendation the question: will higher salaries lead a school district to be able to attract more qualified teachers? Several recent papers have demonstrated that teachers in general are responsive, in

A data appendix with copies of the computer programs used to generate the results, as well as instructions and recommendations on how to apply for access to the confidential data used in this project, are available from the author at the Department of Economics, University of Florida, Gainesville, FL 32611-7140.

Industrial and Labor Relations Review, Vol. 55, No. 4 (July 2002). ? by Cornell University. 0019-7939/00/5504 $01.00

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both their entry and exit decisions, to salaries. However, these papers do not explicitly link salaries to the distributionof teacher hires. Numerous other studies describe a positive cross-sectional relationship between teacher qualifications (for example, test scores, the quality of a teacher's college, or subject-specific knowledge) and teacher salaries. However, there is reason to suspect that these results, however consistent, will not provide much guidance in helping to determine whether raising teacher salaries will result in higher levels of teacher qualifications.1 Might this positive relationship be due to factors other than inter-district differences in teacher salaries? One can easily think of possible omitted variable biases in both directions. Suppose that teachers (and their spouses) who graduated from prestigious colleges tend to locate in suburbs where people of similar backgrounds live. Graduates of more prestigious colleges earn higher incomes (Loury and Garman 1995), and communities with higher incomes tend to pay higher teacher salaries, all else equal (Hoxby 2000; and Figlio 1997b). If teachers prefer to teach in the school districts where their children attend school (perhaps to coordinate vacation schedules, or for numerous other reasons) or simply prefer to work closer to home, then betterqualified teachers may self-select into higher-paying districts for reasons other than salary. Alternatively, the cross-section regression results may be biased downward if school districts compensate teachers, say, for dangerous working conditions or to work with lower-quality students. It seems,

therefore, that in order to address the question of whether higher salaries attract better-qualified teachers, one must attempt to disentangle the effects of the self-selection of teachers for non-salary reasons into highpaying districts from the effects of salary as a means of recruiting better-qualified teachers. Doing so requires more information than a cross-sectional salary regression can provide. In this study, to isolate how changes over time in a school district's teacher salaries affect its probability of recruiting teachers with high qualifications, I make use of multiple rounds of the restricted-access version of the Schools and Staffing Surveys (SASS), administered by the U.S. Department of Education, a rich data source that provides information on individual teacher qualifications and teacher salary schedules. I supplement these data with administrative information collected in the U.S. Department of Education's Common Core of Data and the Census of Governments. I am able to isolate the effects of salary changes because in two years, 1987-88 and 1993-94, the SASS asked the sampled teachers to identify their undergraduate institutions and college major(s). Therefore, I can use panel data to estimate the effects of changes in a particular public school'ssalary schedule from 1987-88 to 1993-94 on that school's probability of recruiting teachers with particular credentials. Doing so allows me to control for unobservable factors that may have been driving earlier evidence of a relationship between teacher pay and teacher quality. Teacher Salaries and Teacher Quality What happens to the probability that a school district's new teacher will have a particular qualification when the school district raises salaries relative to its neighbors? An empirical investigation aimed at answering this question should, ideally, control for factors that differ systematically across districts over time. Some districts will naturally be more attractive to teachers from selective institutions, independent of salary, for instance. Controlling for district

1Studies showing how teachers' entry and exit decisions respond to salaries are Baugh and Stone (1982); Eberts and Stone (1984); Murnane and Olsen (1990); Rickman and Parker (1990); and Theobald (1990). Cross-sectional studies investigating the relationship between teacher qualifications and salaries are Antos and Rosen (1975); Ballou (1996); Ballou and Podgursky (1996); Chambers (1985); Ehrenberg and Brewer (1994); Ferguson (1991); Figlio (1997a); and Smith and Lee (1990).

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INDUSTRIAL AND LABOR RELATIONS REVIEW different context. My sample includes both brand-new teachers and those who have taught elsewhere prior to joining the currently observed school. To reduce the chance of one or a few "good draws"or "bad draws" skewing the results, I look only at school districts with at least four new teachers sampled in each round of the SASS. This does lead to over-sampling of larger districts; according to tabulations from the full sample of the 1993-94 round of the Schools and Staffing Survey, 31% of the nation's new teachers were then employed in the 100 largest districts (Corpus Christi, Texas, or larger), whereas 60% of the new teachers in my sample are employed by these large districts. Even so, my analysis is by no means dominated by the largest urban districts: just 14% of the teachers in my sample are employed by the ten largest districts, compared to 8% of teachers in the country as a whole; and a healthy fraction in of teachers in my sample-10%-teach school districts outside metropolitan areas, so even rural districts are represented. Teacher quality is subjective and unmeasurable. However, there are surely some measurable factors that could be used to indicate teacher quality, or perhaps teacher intelligence. One such measure is the selectivity of a teacher's undergraduate institution, which was found by Ehrenberg and Brewer (1994) to be strongly associated with student achievement. The teachers in my sample attended 764 undergraduate institutions, ranging from open-admissions colleges that accept any applicant with high school equivalency to extremely selective schools such as Harvard University, Williams College, and the University of Chicago. College selectivity is highly correlated, by all measures, with the standardized college entrance examinations used for admissions purposes. Therefore, I use the average SAT verbal score (or SATequivalent, using a technique described in detail by Figlio and Rueben [2001], for colleges in ACT-dominated areas of the country) of entering students in the teacher's undergraduate institution as a proxy for teacher quality. An alternative measure of teacher qual-

fixed effects will also hold constant districtspecific factors on the demand side; some districts may have more of a taste for graduates of selective colleges, for example.2 Since a host of time-varying characteristics are common to all schools in a community at the same time, one should also control for time-specific, community-specific fixed effects. Controlling for both types of fixed effects allows the researcher to ask the question: what happens when school districts, holding constant observed time-varying and unobserved time-invariant attributes, raise their teacher salaries relativeto otherdistricts in the same community? Put differently, can salaries explain why district A is preferred to district B by high-quality teachers at one time but the districts' roles reverse in another time period? My sample consists of 2,672 newly hired teachers in 188 school districts in 89 counties in the SASS.3 I say that a teacher is "newly hired" if that teacher had completed two or fewer years of service in his or her current school at the time of the survey.4 Each round of the SASS is designed to be both nationally representative and staterepresentative of the teaching force, and while the SASS is not designed to be representative of the new teacher force or the set of teachers who change schools, the sample of new teachers in the SASS has attributes similar to those of the sample of teaching force entrants found by Figlio and Rueben (2001) using a very different data set in a

2Ballou (1996) speculated that such differential tastes might explain his finding that potential teachers from selective institutions were no more likely to find employment as public school teachers than were those from less selective colleges. 3The present analysis defines teacher labor markets by county. One-quarter of my school districts are in counties with two or more sampled school districts. When, to allow for even more effective variation, I repeat the analyses using metropolitan area and consolidated metropolitan statistical area in place of county, the results are substantively unchanged. 4My results are robust with respect to alternate reasonable definitions of "newly hired." For instance, increasing the duration since hiring to three or four years, or reducing it to one or zero years, does not substantively affect the reported results.

CAN PUBLIC SCHOOLS BUY BETTER TEACHERS? ity is teacher subject-matter expertise. It is natural to expect that teachers with specific training in the subject they teach will, all else equal, be better qualified than other teachers to teach that subject. Therefore, as an alternative quality measure, I also identifywhether teachers majored (or have a master's degree) in the subjects they teach. Thus, I explore whether school districts that increase their salaries unilaterally are successful in attracting new teachers with more subject-matter expertise as well as graduates from more selective colleges. School districts in the SASS report two points on their salary schedules: starting salaries for inexperienced teachers, and salaries for teachers with twenty years of experience. Since the set of teachers considered in this study includes both brandnew teachers and experienced teachers, and since there is no obvious way to characterize the salary stream of a teacher, I use the average of the starting teacher salary and the experienced teacher salaryreported by school districts as my measure of a district's teacher salary. Many factors besides teacher salaries may affect a teacher's likelihood of being attracted to and hired by a particular school district. Fortunately, a large number of these factors (for example, being in a neighborhood populated by high-income graduates of selective schools, or a particular school district's "tastes" for a particular type of teacher) arguably do not change appreciably over a six-year period, so I can make use of the panel attributes of my data to implicitly control for these (approximately) time-invariant attributes of school districts. But several other factors that may affect the probability of high-quality teachers being hired in a district did change over time. For instance, different parts of the country were differentially affected by the recession of the early 1990s, and there are some factors that will be common to all school districts in a teacher labor market at the same time. To control for all factors that affect every school district in an area at the same time, I control for time-specific, county-specific fixed effects, so that the only variation that I employ is the deviation

689

overtime in the schooldistrict'srelativeposition in the county. There are still some other factors that could be associated with the change over time in a school district's likelihood (relative to others in its county) of hiring teachers with a particular credential. Some districts have been growing over time, while others have been shrinking or maintaining relatively constant enrollments. A school district may change non-salary attributes of its schools (for example, the length of the school day and year, or the racial and income composition of the schools) that independently affect a teacher's probability of being hired, or the teacher's probability of being attracted to the district. Therefore, it is important to control for these other types of factors even when I control for time-varying county-level fixed effects. Table 1 presents a list of definitions and data sources for all variables used in this analysis. The first two columns of the first row of Table 2 present estimates of the results of a regression of the relevant teacher quality variable on district teacher salaries in a model without controls for district-specific fixed effects, county-specific, year-specific fixed effects, or any other covariates. That is, this is merely a regression of teacher quality on teacher salaries and a year dummy variable for 1993-94. All standard errors reported, however, are still corrected for within-school district, within-year correlation in the errors. We observe strong, positive correlations between teacher salaries and both the probability of a new teacher having majored in the subject that he or she teaches and the selectivity of the college that he or she attended as an undergraduate. However, as mentioned above, this is a suspect identification strategy, since there exist numerous potentially omitted variables that could bias the cross-sectional relationship in either direction. Therefore, in the second row of Table 2 are estimates of the same relationship in a model in which both time-invariant district fixed effects and time-specific, county-specific constants are included. As before, the standard errors are corrected for within-

Table 1. Description Variable Average SAT Verbal Score of Teacher's Undergraduate Institution (dependent variable) Mean (Std. Dev.) 451 (51) Specifications Used in:

of Variables

Used in the Regression

Analysis.

Data Source Integrated Data Survey; Postsecondary Education college guides

Method of Cons

Table 1: all rows, cols. 1, 3; Table 3: col. 5

Teacher Majored in Subject He/She Teaches (dependent variable) Teacher Salaries

0.284

Table 1: all rows, cols. 2, 4; Table 3: col. 6 All specifications

SASS teacher file

25,899 (3,841)

SASS school district file

Use IPEDS dat college identifi test score repor guides; in ACT using Figlio-Ru Match college postgraduate e teacher reports teaching assign Average of dist degree and no master's degree to 1993 dollars index

District Enrollment Growth South Union District

0.119 (0.173) 0.495 0.649

Table 4, all cols. Table 4, all cols. Table 2, row D; Table 4, all cols.

Common Core of Data Census Census of Governments; SASS district file

Size of District Teacher Workload Fraction White in School Fraction Free-Lunch Eligible in School

130,359 (218,527) 1,181 (126) 0.538 (0.340) 0.301 (0.246)

Table Table Table Table Table Table Table Table

2, 4, 2, 4, 2, 4, 2, 4,

rows C, D; all rows C, D; all rows C, D; all rows C, D; all

Common Core of Data SASS district file SASS school file SASS school file

Percentage gro 1987-88 to 199 Indicator for b Indicator for w by collective ba from Census o district file School district

Number of day of instruction

School-reported reported enrol School-reported students, divid

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Table 2. Relationship between Teacher Salaries and Teacher Quality.

Quality Indicator Full Set of Teachers New to Their Schools (1) Average SAT Verbal (2) Teacher Scoreof Majored in Undergraduate SubjectHe/She Teaches Institution 0.0017 (0.0005) 0.0027 (0.0015) 0.0027 (0.0012) 0.0035 (0.0025) -0.0013 (0.0025) 0.0004 (0.0002) 0.0045 (0.0013) 0.0046 (0.0016) 0.0087 (0.0032) -0.0060 (0.0034) Only New Teacherswith Prior Teaching Experience (3) Average SAT Verbal Scoreof Undergraduate Institution 0.0019 (0.0005) 0.0047 (0.0022) 0.0038 (0.0017) 0.0049 (0.0036) -0.0016 (0.0038) (4) Teacher Majored in Subject He/She Teaches 0.0008 (0.0003) 0.0068 (0.0019) 0.0070 (0.0025) 0.0153 (0.0021) -0.0120 (0.0023)

Specification (A) Cross-Sectional Relationship (B) Specification with Only CountyYear and District Fixed Effects (C) Specification That Also Includes Time-Varying Covariates (Dl) Specification That Includes All Fixed Effects and Time-Varying Covariates: Nonunion School Effect (D2) Union Interaction

Notes: Each cell represents a separate regression, except the cells in rows (D1) and (D2), which are estimated in the same regression specifications. The results above present only the salary coefficients (*100, in the case of teacher major specifications). Covariates included in some specifications include district size, teacher workload, fraction white in the school, and fraction free lunch-eligible in the school. An appendix table includes the full set of coefficient estimates. Huber standard errors, corrected for the presence of within-year, within-district error correlation, are in parentheses beneath parameter estimates.

school district, within-year correlation in the errors. The results suggest that if a school district unilaterally raises its salaries relative to others in its county, it will increase the quality level of the experienced teachers it hires. The coefficient of interest in each equation is statistically significant at conventional levels, with the coefficient in the subject matter expertise equation being particularly strong in magnitude and statistical significance. The magnitudes of these estimated effects are not trivial. Given that the average within-county standard deviation in experienced teacher salaries is $2,525 (for counties with five or more school districts), an increase in salaries of this magnitude is expected to increase average new teacher quality by about 12 SAT points, the equivalent of a difference in SAT scores between, say, Carnegie Mellon University and American University, or Indiana University and Northern Illinois University. Since the average within-county standard deviation in

new teacher quality is 34.6 points, this implies that increasing salaries by one standard deviation within a county would be associated with an increase in average new teacher quality of more than one-third of a standard deviation. The teacher subject matter expertise specification suggests that a one standard deviation increase in relative salaries is associated with an 11 percentage point increase in the probability that a new teacher majored in the subject that he or she teaches. Since 28% of teachers in the sample have this credential, this is a rather large change. The third row of Table 2 presents the estimated effects of increasing teacher salaries in a model that also includes school district size, the teacher workload (as measured by the number of hours of instruction in the school year), the fraction of students in the school who are white, and the fraction eligible for subsidized lunches (a measure of relative poverty) in the school. Levinson (1988) demonstrated that these

692

INDUSTRIAL AND LABOR RELATIONS REVIEW the results reported herein may still be subject to endogeneity bias. This bias will be downward if increased salaries are motivated by low teacher quality, but the results could be upward-biased if changes in salaries over the six-year period are correlated with other unobserved characteristics that would draw different-quality teachers. Unions and the Teacher SalaryTeacher Quality Relationship It is possible that unionized and nonunion school districts are not alike in their ability to improve their probability of attracting high-qualification teachers using increased salaries. For instance, if graduates from selective colleges and those with subject matter expertise tend to be more highly motivated or produce higher-quality output than others, they may be more likely to want to teach at a school where individual motivation, effort, and performance are more directly rewarded.5 The available evidence from the SASS strongly suggests that higher-quality teachers are rewarded in nonunion differentially schools. For example, nonunion schools in the SASS are three times as likely as unionized schools (24% versus 8%) to have a formal merit pay system (a difference that is statistically significant at any conventional level) .6 Moreover, there is evidence to suggest that unionized schools and nonunion schools reward their high-quality (by my measures) teachers differentially in nonpecuniary ways as well.7 For instance, in the
5Savio (1996) made a similar argument in explaining why high-quality teachers disproportionately teach at private schools despite lower salaries. 6This comparison is computed from an OLS regression in which the dependent variable is an indicator for whether the school has merit pay and the independent variable is a union school indicator. 7The comparisons described in this paragraph are computed from OLS regressions in which the dependent variable is the characteristic faced by the teacher (for example, class size) and the independent variables are the average SAT score of students at the teacher's undergraduate institution, a union school dummy, and the interaction between these two variables.

factors either directly affect or proxy for factors that affect teacher salary demands. While Table 2 only reports the coefficient estimates on the salary variable, a full set of coefficient estimates is presented in the Appendix. The results are reasonably similar to those presented in the first row. The salary coefficient in the college selectivity equation is slightly smaller in magnitude but even more strongly statistically significant than that presented above, and the salary coefficient in the subject matter expertise equation is almost exactly the same in magnitude and statistical significance as when the timevarying covariates are excluded. The third and fourth columns of Table 2 report the results of this analysis repeated only with the set of experienced teachers, that is, teachers who previously taught in another district. I look at this set of teachers separately because it is possible that experienced teachers have a better knowledge of teaching opportunities in other districts in a community than would brandnew teachers. The results are qualitatively similar, but somewhat stronger in magnitude and statistical significance, with this sampling restriction. It is possible that salaries and quality are simultaneously determined. For instance, schools with lower-quality teachers (or declining teacher quality) may be more inclined to increase salaries, which would lead to a downward bias in the relationship between teacher salaries and teacher quality. On the other hand, the results could be upward-biased if the improving teacher quality puts upward pressure on salaries. Although I include a rich set of fixed effects-both time-invariant effects within a district and time-varying effects at the county level-that should address the omitted variables problem to a large extent, the potential endogeneity of the teacher salaries could present problems in the current specification. Regrettably, since I have not been able to identify any instrumental variables that are strongly correlated with within-county changes in a district's salary schedule but not independently correlated with changes in teacher quality measures,

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SASS the relationship between average class size for a mathematics, science, or social studies teacher and the average SAT score of entering students at that teacher's undergraduate institution is negative, though not statistically significant, across all schools, but it is significantly lessnegative for unionized schools. The results suggest that in nonunion schools, a teacher who attended Stanford University would average .8 fewer students per class than a teacher who attended the University of California at Berkeley and 1.7 fewer students per class than an attendee of San Jose State University, compared to differences of .33 and .75 students per class, respectively, in unionized schools. The difference in this relationship between unionized and nonunion schools is significant at about the 3% level. Similarly, a non-statistically significant, modestly negative estimated relationship between the SAT score of the teacher's undergraduate institution and the number of unique "preparations" required of that teacher by the school district is, again, less negative for teachers in unionized schools than for those in nonunion schools: in nonunion schools, a teacher who attended a school with SAT scores like those of Cornell University is predicted to have to satisfy 0.04 fewer preparations than a teacher who attended a school with the SAT scores of SUNY-Binghamton, and 0.08 fewer preparations than a teacher who attended a school with scores like those of SUNY-Cortland, compared to figures of 0.01 and 0.03 fewer preparations, respectively, in unionized schools. The difference in this relationship between unionized and nonunion schools is statistically significant at about the 11% level. These results constitute suggestive evidence that nonunion schools differentially reward higher-qualified teachers, in both pecuniary and nonpecuniary ways, although the magnitudes of these differences, while statistically significant, are not very large. In order to determine whether the relationship between teacher salaries and the likelihood of recruiting and hiring highqualification teachers differs by school district union status, I estimate the baseline

models from Table 2, but also interact the teacher salary variable with a dichotomous variable representing whether teachers in the school district were covered by a collective bargaining agreement over this time period. Every school district in my sample had the same union status in both 1987 and 1993 (the 1987 data come from the Census of Governments, and the 1993 data from the SASS), so a union status dummy variable is subsumed into the district fixed effect and is therefore obviously not separately reported. These results are reported in the fourth and fifth rows of Table 2. I find limited evidence that the relationship between salaries and the likelihood of recruiting high-quality teachers differs between union and nonunion school districts. For both brand-new teachers and experienced teachers who are new to a school, the positive relationship between salary and the selectivity of the college the teacher attended is higher for nonunion school districts (though only statistically significant at the 18% level) than for unionized school districts, although the interaction term is extremely imprecisely estimated.8 Specifically, in nonunion school districts, a one within-county standard-deviation increase in salaries predicts a 12-point increment in the SAT verbal scores of newly hired teachers' undergraduate institutions, compared to a predicted improvement of only 8 points in unionized school districts. Again, this particular difference is imprecisely estimated. Results of substantially larger magnitude and with statistical significance at conventional levels are observed for the positive association between salary and teacher subject matter expertise.9 The OLS results suggest that a one within-county standard-deviation increase in salaries

8Because of the larger sample size of unionized districts, these smaller estimated salary effects for unionized schools are still statistically significant. The salary effect in unionized schools is .0023 (standard error of .0009) in column 1 and .0033 (standard error of .0013) in column 3. 9The estimated effect of salaries in unionized schools is .0027 (standard error of .0019) in column 2 and .0033 (standard error of .0015) in column 4.

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INDUSTRIAL AND LABOR RELATIONS REVIEW ent kinds of teachers may naturally be different.) I am unable to evaluate this possibility because, lacking data on the pool of applicants for specific teaching positions, I have no way to gauge administrator preferences. Alternatively, perhaps teacher unions impose additional constraints on hiring (for example, requiring a certain amount of education coursework) that tend to favor graduates from less selective institutions or candidates without specific subject matter expertise. Such a filtering process might attenuate the relationship between teacher salaries and teacher qualifications even if administrators desire to improve teacher qualifications and more teachers from selective colleges apply to the school district. Spurious Correlation? The preceding discussion suggests that while nonunion public schools attract better-quality teachers as they increase their salaries, these results tend not to be as strong for unionized public schools. Are the differences due to unionization per se, or am I merely picking up the effects of factors correlated with unionization? For instance, southern school districts are much less likely to be unionized than are school districts outside the South, and it may be that nonunion districts are younger and faster-growing than are unionized districts. As such, the reported results may be due merely to North-South differences. Table 3 presents union-nonunion differences for a host of school characteristics. As noted, nonunion schools are disproportionately clustered in the southern United States: while 29% of unionized teachers in the SASS teach in the South, 88% of nonunion teachers in the SASS are in the South. Unionized school districts also apparently are growing somewhat more slowly than are nonunion districts: the mean growth from 1987 to 1993 in unionized districts in the SASS was 11%, compared to 13% in nonunion districts. Unionized schools tend to have teachers who are slightly more experienced and have slightly more education-the average teacher experience in

boosts the likelihood of hiring a teacher who majored in his or her subject matter by about 22 percentage points in a nonunion school district, compared to only 7 percentage points in a unionized school district. The magnitudes of the effects, as well as the estimated gaps between union and nonunion schools, are larger when we look only at the set of experienced teachers. Therefore, while there is little or no evidence that the relationship between salaries and the probability of hiring a teacher from a selective institution varies with school union status, there is relatively strong evidence that union status affects the relationship between salaries and the probability of hiring a teacher with subject matter expertise.10 Why might the results hold more strongly for nonunion districts than for union districts? There are a number of possible reasons, none of which is complete or fully convincing. Besides the possible supply side arguments mentioned above, one possible additional reason is that unionized public schools may simply not be interested in hiring better-quality candidates. That is, it is possible that higher salaries draw better-quality applicants, but that administrators of unionized public schools, for whatever reason, prefer to hire lower-quality teachers. Ballou (1996) cited that possibility in trying to explain his finding that potential teachers from selective colleges were no more likely to find teachingjobs in the public sector than were potential teachers from less selective colleges. (Of course, a lack of interest in hiring the best teachers is not the only possible way to explain Ballou's finding, since demands for differ-

'1In other specification checks, I experimented with interacting the other covariates with school union status. In only one case was such an interaction statistically significant at even the 30% level: the interaction between district size and union status in the college selectivity specification. These results suggest that larger districts fare better in attracting graduates of selective colleges if the district is unionized. This interaction term, however, is not statistically significant in other specifications.

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Table 3. Differences Characteristic

between

Union

and Nonunion

Schools

in the SASS. Nonunion Schools 0.875 0.130 11.62 0.409 0.745 0.789 0.696 0.544 0.511 p-Value of Difference 0.000 0.023 0.000 0.002 0.247 0.001 0.000 0.000 0.112

Unionized Schools 0.289 0.114 12.55 0.453 0.765 0.735 0.624 0.670 0.480

South District Enrollment Growth from 1987 to 1993 Teacher Experience (years) Percent with Master's Degrees State Certification Required for Employment Passage of Test Required for Employment Passage of Subject Knowledge Test Required for Employment Education School Attendance Required for Employment Subject Matter Major/Minor Required for Employment

unionized schools in the SASS is 12.6 years, compared with 11.6 years in nonunion schools, and 45% of teachers in unionized schools have master's degrees, compared to 41% in nonunion schools. All four of these differences are significantly different from zero. To determine whether my results are really "South" effects or "fast growing district" effects rather than union status efthat infects, I estimate the specification cludes all fixed effects and time-varying covariates once again, but this time also interacting all salary variables both with a South region dummy and with the district growth rate, measured by the percentage increase in district enrollment from 1987 to 1993. The results of this exercise are reported in Table 4. The reported specification is for all teachers new to a district, regardless of experience, but the pattern of results remains the same when only teachers with previous teaching experience are sampled. Because of the richly interacted specification, it is difficult to read the estimated effects of teacher salaries on teacher qualeffects of teacher ity, or the differential unions on this relationship, directly off of Table 4. Therefore, in the bottom portion of the table I present the implied difference between union and nonunion schools in their relationship between teacher salaries and teacher quality in a number of settings. Specifically, I present that esti-

mated difference in southern versus nonsouthern locales, and, within each of those two geographic groups, for school districts with 25th percentile growth rates, median growth rates, and 75th percentile growth rates. The estimated union-nonunion difference tends to hold up across these different groups: in the non-South, the estimated difference is negative (meaning that unionized schools have a more negative-or less and statistically sigpositive-relationship) nificant across the various ranges of growth rates, for both measures of teacher quality. The results for the South are less clear-cut. While the union-nonunion difference is uniformly estimated to be negative in the case of subject matter expertise (and statistically significant for faster-growing school districts), the estimated union-nonunion difference is positive, though not statistifor college cally significant, selectivity. these somewhat equivoNotwithstanding cal results for the South, the estimates for the non-South, which unambiguously show a union-nonunion difference, demonstrate that the estimated relationships are not merely driven by North-South differences. One might also question the conclusion regarding differences between unionized and nonunion schools by calling into question the adequacy of the specific set of teacher quality indicators used in this study. That is, although the link between salary increases and increased hiring of teachers

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INDUSTRIAL

AND LABOR RELATIONS

REVIEW

Table 4. Results by Region

and District Student

Enrollment

Growth Rate.

Quality Indicator (5) Average SAT VerbalScoreof UndergraduateInstitution (Salary Coefficient) -0.00 (0.0050) -0.0068 (0.0031) 0.0099 (0.0036) 0.0135 (0.0071) 0.0023 (0.0171) -0.0014 (0.0169) Relationship Difference, in Different South 0.0067 (0.0082) 0.0066 (0.0074) 0.0065 (0.0069) (6) TeacherMajored in Subject He/She Teaches (Salary Coefficient* 100) -0.0023 (0.0041) -0.0053 (0.0032) 0.0054 (0.0044) -0.0049 (0.0076) 0.0188 (0.0183) -0.0180 (0.0181) Circumstances: Non-South -0.0054 (0.0032) -0.0068 (0.0030) -0.0082 (0.0035) South -0.0103 (0.0089) -0.0118 (0.0079) -0.0132 (0.0070)

Variable Teacher Salaries Teacher Salaries * Union Teacher Salaries * South Teacher Salaries * Union * South Teacher Salaries * District Growth Rate Teacher Salaries * Union * District Growth Rate Estimated

Union-Nonunion

Non-South District Growth at 25th Percentile (0.07% over 6 Years) District Growth at Median (8.3% over 6 Years) District Growth at 75th Percentile (15.9% over 6 Years) -0.0068 (0.0031) -0.0069 (0.0031) -0.0070 (0.0036)

Notes: All specifications include school district-specific fixed effects and county-year fixed effects. Huber standard errors, corrected for within-district, within-year correlation in the errors, are in parentheses beneath parameter estimates.

possessing the qualifications specifically tracked in this study appears to be stronger in nonunion schools than in unionized schools, it could be that new estimates using a different set of teacher quality indicators would reveal a different pattern, since unionized and nonunion schools may differ significantly in credential requirements. The bottom panel of Table 3 reports the means across unionized and nonunion teacher schools in district-reported credentialing requirements. There is no discernible difference between union and nonunion schools in the fraction requiring state certification. Unionized schools are significantly more likely than nonunion schools to require education school attendance. In contrast, they are marginally significantly less likely than nonunion

schools to require teachers to have majored or minored in their subject of choice (p < .11); significantly less likely than nonunion schools to require teachers to pass the National Teachers' Examination or a state test of basic or subject-specific skills; and highlysignificantly less likely than nonunion schools to require passage of a state or national subject-specific test. Therefore, if anything, it appears that nonunion school districts tend to have higher basic standards than unionized schools along several lines of required credentials. Conclusions Can public schools attract better-qualified teachers by raising teacher salaries? The evidence presented in this paper suggests they can. Using an empirical ap-

CAN PUBLIC SCHOOLS BUY BETTER TEACHERS? proach that avoids many of the most likely omitted variables problems associated with cross-sectional analysis of this issue, I find a positive, statistically significant relationship between changes in a school district's teacher salaries and its likelihood of recruiting higher-qualified teachers, measured in terms of college selectivity as well as subject matter expertise. However, this relationship holds only for nonunion school districts, not, in general, for unionized school districts. Although this union/nonunion difference could conceivably be for instance, sample-specific-reflecting, the over-representation of larger school districts in the sample-it is strongly confirmed within the framework of the study. It is, moreover, consistent with Hoxby's (1996) finding that unionized schools pay higher teacher salaries than nonunion schools and yet have lower academic performance (measured by a higher dropout rate). The results of the study suggest that schools-at least nonunion schools-can succeed in luring high-quality, predomiries.
nantly already established teachers away from other districts by unilaterally raising sala-

697

I have not addressed whether the

overall quality of new teachers hired can be improved through more broadly coordinated salary increases across a large number

with the efficacy of, say, public policy-gen-

of schools. My finding that teachers in my sample of nonunion schools were responsive to salaries certainly is not inconsistent

erated pay increases across the teaching profession, but further analysis with different data would be needed to address that issue directly. It is important to note that raising teacher salaries to recruit better-quality new teachers could come at a significant cost. American public school systems pay teachers, in general, according to a salary schedule whereby all teachers with a certain combination of education level and experience earn the same salary. Increasing salaries to attract new teachers would involve raising the salaries of existing teachers of lower quality. Therefore, such a policy, though possibly effective, may be prohibitively costly. The union-nonunion differences rein this paper, however, suggest the ported potential viability of an alternative policy: instituting merit pay or pay-for-performance. Such a policy, though apparently at odds with the emphases of teacher unions, may provide opportunities to differentially attract high-quality teachers with higher pay, while not shifting up the salary distribution to all teachers. A central problem with merit pay, of course, is that it would require schools to measure the basically unmeasurable-teacher quality. How to go about doing that is a matter beyond the scope of the current paper. This paper does, however, provide evidence that one precondition for merit pay to be effectivehigh-quality teachers' responsiveness to salaries-is present.

698

INDUSTRIAL

AND LABOR RELATIONS

REVIEW

Appendix Full Set of Coefficients from Third-Row (C) Specifications in Table 2 Credential (Columns): Full Set of TeachersNew to Their Schools Only New Teachers with Prior Teaching Experience

Variable Teacher Salaries Size of District Teacher Workload Fraction of Students in School Who Are White Fraction Free Lunch-Eligible in School

(3) Average (4) Teacher (2) Teacher (1) Average SAT SAT Majoredin Majored in Verbal Verbal SubjectHe/She SubjectHe/She Scoreof Teaches Teaches Scoreof Undergraduate (Coefficients Undergraduate (Coefficients Institution Institution *100) *100) 0.0027 (0.0012) -0.0000 (0.0011) -0.0021 (0.0145) 0.0836 (0.0750) -0.0124 (0.0736) 0.0046 (0.0016) -0.0006 (0.0008) -0.0066 (0.0129) -0.0201 (0.0585) -0.1071 (0.0616) 0.0038 (0.0017) -0.0012 (0.0015) -0.0059 (0.0176) 0.1354 (0.0970) -0.0896 (0.0759) 0.0070 (0.0025) -0.0004 (0.0013) -0.0103 (0.0137) -0.0246 (0.0832) -0.1160 (0.0793)

Note: All specifications include school district-specific fixed effects and county-year fixed effects. Huber standard errors, corrected for within-district, within-year correlation in the errors, are in parentheses beneath parameter estimates.

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