The (Enormous) Economic Returns to a Good Teacher



By 04/05/2011

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It has now become conventional wisdom that teachers are the most important ingredient in an effective school.  It is probably also the case that teachers are the most important ingredient in an ineffective school.  The point is that that there are large differences in teacher quality, and these differences are felt in very tangible ways by students and by U.S. society.

Even as parents and policy makers repeat the line that good teachers are very important, they seldom understand just how important.  Discussions of standard deviations of test scores simply have little meaning to most people (including assessment people themselves).

I have tried to describe the value of teachers in a narrow but important and understandable way.  In an article published today in Education Next, I calculate the value of a good (and a bad) teacher by tracing the economic ramifications of differences in student achievement.  It turns out that this involves a fairly straightforward set of calculations.  A good teacher gets above average achievement out of her students.  We have clear and consistent measures of the achievement impact of a good teacher.  We also have very consistent measures of the impact on an individual’s future earnings of having higher achievement.  Put these two things together and one gets a direct estimate of how much the average student can expect to gain from having a top teacher.

The numbers are astounding.  A teacher at the 85th percentile can, in comparison to an average teacher, raise the present value of each student’s lifetime earnings by over $20,000–implying that such a teacher with a class of 20 students generates over $400,000 in economic benefits, compared to an average teacher, for each year that she gets such achievement gains.

Gains go up and down with how good the teacher is and with how many students she has.  And the gains are symmetrical in comparison to the average teacher – a teacher at the 15th percentile subtracts $400,000 in value from her class of 20 students.

An alternative way to value of teachers simply focuses on the aggregate costs to the U.S. economy of tolerating poor teachers in the classroom.  Again, by using information about quality differences among teachers, if we could replace the bottom 5-8 percent of our teachers with average teachers, we could move our students’  achievement up to that of Canada.  Because the quality of the labor force is directly related to what students know (as measured by math and science tests), the economy would by historical patterns tend to growth more rapidly with improvements in achievement (see the discussion in “Education and Economic Growth” ).   We can then use historical patterns of growth to estimate the aggregate economic value of greater achievement.  Moving to the level of Canada has a present value of over $75 trillion.

These calculations are described in detail in the Education Next article, “Valuing Teachers.”

The simple argument is that these gains – to individuals and to society – seem large enough that we might consider more fundamental changes to the way we run our schools.  We need to pay much more attention to ensuring that there is an effective teacher in every classroom.

-Eric Hanushek