The implications for teachers’ pay of new NFER research findings

Today the Office of Manpower Economics have published new research on the teacher labour market in England, which uses 30 years of longitudinal teacher-level data to add to our understanding of teachers’ labour market behaviour. As the Department for Education (DfE) considers what proposals to make about teachers’ pay over the next two years, what implications do the research findings have for those decisions?

1) Teachers who leave tend to earn less than they otherwise might do if they stay in teaching

We analysed the pay of teachers who left and compared it to otherwise similar teachers who stayed and found there was an earnings gap over time. We found that the gap between what leavers earned after leaving and what they might have earned if they had stayed kept widening after they left.

This may suggest that pay is not a major factor for teachers’ decisions about whether or not to stay in teaching. However, it also implies that teachers who leave may be willing to sacrifice a lower earning trajectory in return for other benefits, which may include a more manageable workload or better opportunities for part-time or flexible working. Indeed, workload is often cited in surveys of ex-teachers as their main reason for leaving the profession, supporting this idea.

It does not imply that changes to teachers’ pay would have no impact on retention. Everything else equal, an increase in teacher pay is still likely to encourage some teachers to consider staying when weighed up against the relative merits of all the other factors influencing their decisions of whether to leave or stay.

While our analysis of the relationship between retention and relative teacher pay found no significant association (most likely because of a large amount of statistical noise in the data) the research literature, including experimental studies from the Unites States, suggests that more competitive teacher pay is associated with fewer teachers leaving.

2) Few teachers who leave move into other professional occupations

Teacher pay is often benchmarked to earnings in other professional, graduate occupations to assess its competitiveness (for example, by the pay review body, and in our research). While this makes sense from the perspective of understanding the options available to graduates weighing up a decision of whether or not to enter teaching, it may make less sense for teachers who have already made the leap into teaching and are deciding whether or not to leave.

Our analysis showed that only around two per cent of teachers who left teaching actually moved into a professional or managerial occupation outside of teaching straightaway, and only three per cent were working in a professional or managerial occupation 10 years after leaving. The most common type of destination for teachers who left was instead to work in the wider education sector (including tutoring, in a local authority role, in further or higher education, childcare or as a teaching assistant).

The findings indicate that the vast majority of teachers who leave teaching do not move into professional or managerial occupations outside of teaching. This raises a question about whether the common practice of assessing competitiveness by comparing teachers’ pay to the pay level in other professions represents a valid benchmark for understanding the ‘outside option’ for teachers who are considering whether to leave or stay.

3) What matters for assessing the competitiveness of teacher pay is how it changes relative to pay in the wider economy

With a question around the common practice of benchmarking to professional pay, we set out to create a new benchmark measure, based on the types of occupations that teachers tend to move into when they leave. We then assessed how the competitiveness of teachers’ pay relative to both measures had changed over time between 1991 and 2019.

Both measures indicated quite similar findings. Both benchmarks suggested that the relative competitiveness of teacher pay rose during the period before the 2008 recession and that it has fallen during the 2010s, as a likely result of public sector pay caps. Many factors affecting pay in the economy over time, such as government policy and economic growth, affect many sectors of the economy similarly, so it perhaps isn’t too surprising that professionals’ pay and a tailored measure of teachers’ outside pay are pretty similar. For this reason, we therefore believe it remains reasonable to benchmark teachers’ pay to other professions, and there is not sufficient evidence of a superior alternative.

Our analysis also shows that both measures highlight a similar picture for the trend in the competitiveness of teachers’ pay and suggest that the competitiveness of teacher pay is lower in 2019 than it was in 2010. That indicates that pay is likely to have been, at least in part, a contributory factor to teacher leaving rates worsening in the period after 2010.

4) Government decisions on teachers’ pay need to be informed by the teacher supply context

Regardless of how competitive teachers’ pay is compared to the rest of the economy in absolute terms, one of the main factors affecting decisions about what changes need to be made to teachers’ pay is the relative strength of teacher supply. Sufficient teacher supply depends on enough new teachers being recruited into training to meet the demand created by teachers leaving (and also by demographic and policy changes).

The current state of teacher supply in England is complex. The Covid-19 pandemic and associated recession led to more people entering teacher training in 2020 and 2021, compared to previous years. This was due to opportunities in the wider economy drying up and teaching being seen as a safe haven with high job security.

Fewer teachers also left the profession during the pandemic, improving teacher supply. This improvement prompted the Government to freeze teacher pay, in part because there was less need to bolster competitiveness at a time when supply was healthy for other reasons and because forecasts of outside pay growth were low.

However, there are now strong signs that teacher recruitment and retention are weakening again and the rest of economy is strengthening. This puts the importance of the competitiveness of teachers’ pay – measured against whatever benchmark is used – back on the policy agenda.

So what should the Government decide about teachers’ pay?

As the recruitment and retention trends suggest that teacher supply is becoming challenging again, the Government needs to consider a pay rise. The DfE has said that they do intend to increase teachers’ pay to ‘address recruitment and retention challenges’.

The Office for Budget Responsibility forecasts that average pay in the economy is set to grow by around four per cent per year over the next three years. Therefore, the Government would need to set teacher pay at a similar level just to maintain the competitiveness of teachers’ pay. Setting pay lower than this risks lower levels of recruitment and retention, and the risk that teacher supply weakens and shortages emerge.

This is achievable, but is challenging within the tight fiscal envelope set for the schools’ budget by the Treasury in the recent Spending Review. One way to maximise value for money is to target larger pay rises at groups of teachers for whom increases are likely to have the greatest positive impact. Part of the DfE’s proposals is going to include increasing the pay of early-career teachers faster than that of more experienced teachers.

Our research provides some supporting evidence to this case. We found that our measure of outside pay suggests that the competitiveness of pay for experienced teachers has been higher in the 2010s than it has been in other periods and has not deteriorated as a result of the public sector pay restraint, as much as for early-career teachers. This points to a relatively greater share of resource towards improving early-career teacher retention representing good value for money.

However, this strategy does also have risks. Flattening the pay structure too aggressively could blunt the financial incentives for teachers to progress into leadership roles. This was a risk flagged by STRB in 2020, which they pushed the DfE back on in their recommendations. It could also cause consternation among experienced teachers and lead to more leaving, which would be counterproductive.

We look forward to seeing the DfE’s proposals for teachers’ pay in the coming weeks, to see whether they are likely to be sufficient to address the recruitment and retention challenges ahead.