Pay-it-Back Plan for Teacher Pay

The other day, a beleaguered K-12 teacher told me with a sigh that it didn’t seem fair that teachers were being paid. What if, she wondered, teachers were given a percentage of each student’s earnings when those students grew up and started making money. In this way, we would all see what a huge impact a teacher really has.

I thought it was an interesting idea, but I immediately had some reservations. For example, if I taught a neighborhood kid how to play basketball and played with him every day for a year, and then he accidentally became the next Michael Jordan, I wouldn’t expect him to give me anything or what he earned. It never crosses my mind that he owes me anything. Why would a teacher think that he should be rewarded for the future success of his students?

Is that why we pay teachers? Are we paying them because the value of teaching comes from the future extra earnings of those they teach? I don’t think this is the only reason we pay teachers, or even the main reason, but imagine for a moment if that were the case. I’m willing to accept the idea that teachers tend to be underpaid and that maybe some kind of payback plan based on a percentage of earnings would be better for teachers, students and schools.

What if teachers, students, and schools could choose whether teachers would be paid now when they teach, or in the future when one of their students earns some money. Will it, can it be useful for teachers? Before we answer this question, let’s first ask if it would be better for students? Would students prefer to pay a flat fee for education now, or would they prefer to receive an education without current costs, but only with the promise to pay later? Now, K-12 students don’t pay for their education at all, because it’s either public (and paid for by taxpayers) or private (and paid for by their parents). Parents, however, may agree with our payback plan. Instead of paying for a private school now, they could make their child pay for it themselves sometime in the future. So, on the buyer side, I could imagine that there would be parents who would be happy to send their children to private schools for free with the promise that these children would then have to recoup the costs later. The burden of payment was shifted to the students.

Let’s do some math to see if teachers will accept this payback plan. We use some simple estimates. Imagine that it costs $25,000 a year to send a child to a private K-12 school, or the same amount of taxpayer dollars to fund a student in a public school. In just 13 years of study, this is $325,000. Now imagine that there are an average of 20 students in a class, and that a teacher at this school earns an average of $50,000 a year. This means that the school charges $400,000 for this class, and that only 1/8 of the income goes to the teacher, with the rest going to funds, psychologists, art, music, buses, administration, and the like.

So in our cashback plan, in which teachers get paid nothing up front but get paid more later on, we will cut private school tuition by 1/8th, bringing tuition to $21,875. Again, this looks good for the parents and the school is happy because it is now easier to recruit more students. Not being paid in the present is certainly not ideal for teachers, but if they think the future earnings of students can be promising, and if they philosophically believe that teachers should be rewarded for the future success of their students, then they could sign up for this plan.

In terms of payback, how much should students pay their teachers? How about 1 percent of their earnings each year for every K-12 teacher they had? And for teachers whose students were 1/5th or 1/6th per day, as is customary in high school, they will pay the corresponding amount of 1/5th or 1/6th or one percent of their annual earnings to their old teachers each year.

The big problem with this plan is that teachers will have to wait quite a long time to see their money. Let’s say the average person doesn’t get a job and doesn’t earn until the age of 25, and then they earn an average of $50,000 a year for 20 years, and then $100,000 a year for the next 20 years. before retiring at age 65. Based on 1% of their earnings, each former student would pay each of their former teachers $500 a year for 20 years and $1,000 a year for 20 years, or $60,000 in total.

One problem is that it won’t incentivize preschool teachers, as it’s better to teach in 12th grade than kindergarten if you had to wait for your former students to start making money. For example, in this paid plan, if you taught in kindergarten (6 year olds), you would have to wait 19 years after your first year (when your former students turn 25 and start working) to get anything . Then, in the first year, 20 of your former students send you $500 each, and you end up with $10,000. It seems very small. However, each successive year, a new group of your former students entered their working lives and sent you an additional $10,000. This means that in year 2 of payments (20 years after you started teaching kindergarten) you will receive $20,000 and in year 3 you will receive $30,000, a year, etc. If your teaching career spanned 30 years and you taught 30 classes of 20 students who agreed to the promise of a payback plan, you will end up earning $300,000 a year as the value of your teaching is finally realized.

Would any of the teachers agree to a payback plan? Maybe some will, but I suspect most won’t. Of course, if the total payback plan was too low for teachers, we could always change the scale so that, for example, students could pay each teacher 1.5 percent of their annual salary. . This would mean destitution, even starvation for years, only for the promise of huge windfall profits years after retirement. Even if we raise the rate to 2 percent, some teachers may not accept it. If the stakes were high enough, neither the students nor their parents would do it.

The described payback plan ignores many problems that need to be solved. One such problem is the discounting of future earnings. Better to have $10,000 now than $10,000 10 years from now. This is because you can invest $10,000 now and have a lot more than $10,000 in 10 years. So the larger future returns from the cash back plan are not as great as they might seem.

There is also the issue of trust. Will all these former students return? What if they renege on their agreements? What if they say, as supporters of student loan forgiveness, that they shouldn’t be burdened by this decision their parents made for them to pay for their tuition? It may be better for teachers to get paid now than later, because you never know for sure if conditions will change or if promises will be kept.

However, the biggest problem with the payback plan may be the inequality it promotes. If teachers’ salaries were dependent on the future earnings of their students, there would probably be a huge pay gap between the best or at least the most successful teachers and the worst or least fortunate teachers.

There is also the issue of attribution. How do we know which teachers actually influenced a student’s ability to earn money later? In my case, for example, I could repay all my teachers from kindergarten to sixth grade, since they were all good enough, I learned a lot, and this probably prepared me for a future in which I had some earning potential. . But the teachers I had from 7th to 12th grade were varied, and half of them probably harmed my future earnings more than helped them, so I gave most of them nothing. Are these bad teachers willing to risk their paychecks for a cash-back plan in which their former students decide whether they placed any value on their ability to make money?

The cashback plan probably won’t solve teacher pay issues, but it will help us think about the fact that we already have a stable way to pay teachers. Instead of waiting for the future potential value of education, our private and public school systems pay teachers in the present only in the hope that the education will pay off in the future. Investing in our education systems makes it possible to pay teachers now and pay them all equally, even if some of them will have a greater impact on students than others. This makes pay more equal across the board than it could be in a cash-back system that stakes on students’ future success.

Michael J. Duma

Michael J. Duma is Assistant Research Professor at Georgetown University’s McDonough School of Business, where he is also Director of the Georgetown Institute for Market and Ethics Studies. He is a co-author What is classical liberal history? (Lexington Books, 2017) and author Creative historical thinking (Routledge, 2018).

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