When schools have money…

When schools and school districts have more money and spend more money, what do they spend it on?

We are told these days to believe that everything we thought about the virtues of small class size back in the 1990s was misguided. That improving teacher quality trumps reducing class size any day when it comes to efficiently improving student outcomes. We are told to believe that teacher quality can be improved at nominal cost, whereas achieving similar gains via class size reduction would be absurdly inefficient and very costly. Yet to date, we have little evidence that we can actually achieve the same measured outcome gains achieved by reducing class size in the 1990s by instead improving teacher quality… and that this can easily be done at lower cost. In fact, many go so far as to argue that we can take the same average teacher wage, and instead of paying older teachers more and younger teachers less, we just have to pay better teachers more and worse ones less – and that somehow this will lead to a new interest in teaching among our best and brightest college graduates. I struggle with the reasoning here, and certainly have not seen the evidence.

I am particularly skeptical that dramatically reducing the predictability and stability of career earnings, while not altering dramatically the average level of compensation can result in any positive changes to teacher quality. This is especially true if higher teacher wages are tied to extremely noisy measures of teacher performance – making it difficult for a teacher to even control, no less predict his/her career earnings.

We do know from many older studies that improving wages can improve the teacher workforce:

  • Murnane and Olson (1989) find that salaries affect the decision to enter teaching and the duration of the teaching career.[1]
  • Figlio (1997, 2002) and Ferguson (1991) find that higher salaries are associated with better qualified teachers[2]
  • Loeb and Page (1998, 2000) find that raising teacher wages by ten percent reduces high school dropout rates by between three and six percent and increases college enrollment rates by two percent.[3]

We also know that imposing strict spending limits on public schooling, thereby limiting the ability of public schools to pay competitive salaries can harm teacher quality over time:

  • Figlio and Rueben (2001) explain: “Using data from the National Center for Education Statistics we find that tax limits systematically reduce the average quality of education majors, as well as new public school teachers in states that have passed these limits.”[4]

Interest in teacher quality over class size reduction has grown so strong that some are beginning to make the leap that we should simply increase class size to 30 or even 35 students per class in order to pay enough to get really good teachers. After all, who can argue with the logic that a good teacher with 35 kids is better than a crappy one with 20 kids.  Of course, this assumes falsely that every class of 35 would be taught by a better teacher, on average, than those teaching the classes of 20, because every teacher currently teaching the smaller classes is crappy. That said, we do have pretty consistent evidence that salary increases could increase teaching quality.

However, we also have at least some evidence that teacher quality and class size interact.  We may find that we are fighting a losing battle trying to recruit high quality teachers to teach classes of 35 kids even at the higher salary. This may especially be the case in schools and districts where large classes are particularly difficult to manage. Class size is a working condition and more desirable working conditions can reduce the need for paying higher salaries – another trade-off for which we have no good dollar to dollar estimates.

This brings me to my somewhat related data query for the day. When schools have money to spend, what do they spend it on? When looking at high spending suburban school districts, or looking at private independent schools, which I have referred to elsewhere as “luxury” schooling, what are their defining attributes?

Arguably, the defining attributes of luxury schooling simply reflect the demands of luxury schooling consumers – residents of high spending affluent suburban communities and parents who send their children to private independent schools. Go to nearly any private school web site – or web site on “why you should choose a private school,” and you will find one item at the top of the list nearly every time – Small Class Size- or Individual Attention (and alternative angle on what? small class size!). But this is irrational right? Why should affluent suburban consumers or private school parents prefer something that simply drives up the price and with diminishing marginal returns? Whatever the reasons, they do, and arguably lower pupil to teacher ratios and smaller class sizes are a, if not the defining feature of “luxury” schooling.

First, here are the per pupil spending levels in select labor markets, for private schools by type and for public schools in the same labor market.

FIGURE 1 : Per Pupil Spending of Private and Public Schools by Labor Market

Private independent schools in particular, systematically outspend public schools in the same labor market by about 2/1!

And this graph shows the pupil to teacher ratios for public schools, all private schools, private Catholic schools and private independent schools. Private independent schools spend double what public schools spend, and leverage most of that money to provide pupil to teacher ratios that are approximately half those of the public schools (teacher salaries are similar to slightly lower than public school salaries).

FIGURE 2: Pupil to Teacher Ratios of Private and Public Schools

Now, this graph shows the per pupil state and local revenues of public school districts in the NY metropolitan area, by district poverty rates. In New York State, as we show at schoolfundingfairness.org, higher poverty districts have systematically fewer resources than their lower poverty, often very affluent suburban neighbors. This graph validates that pattern.

FIGURE 3: Per pupil Revenues of New York Metro Area Districts (in NY State) by Poverty

Now here are the elementary class sizes by district spending group. Note that as spending per pupil increases, class sizes systematically decrease.

FIGURE 4: Spending and Elementary Class Size

The same pattern holds for middle and secondary class sizes.

FIGURE 5: Spending and Middle/Secondary Class Size

Note that at least some of the smaller class size at the middle/secondary level in the highest spending public school districts is a function of providing a diverse set of specialized elective courses, advanced placement classes, multiple languages and so on. The same is true for private independent schools. These are opportunities that many lower spending and/or higher poverty districts in many states go without.

Yes, consumers of luxury schooling seem to have a pretty strong preference for small classes, despite modern wisdom that class size is clearly second fiddle to teaching quality. Imagine the teacher salaries one could pay by moving pupil to teacher ratios in independent schools from 8/1 up to the public school average of 16/1. Imagine the salaries that could be paid in affluent Westchester County and Long Island school districts by increasing class sizes from 16 or 18 up to 35? (see this post on just how high these salaries already are!)

For some reason these private schools and affluent public school districts – more specifically those who support these schools – exhibit a strong preference for small class size even when given wide latitude to cho0se differently. Perhaps they are on to something?


[1] Richard J. Murnane and Randall Olsen (1989) The effects of salaries and opportunity costs on length of state in teaching. Evidence from Michigan. Review of Economics and Statistics 71 (2) 347-352
[2] David N. Figlio (1997) Teacher Salaries and Teacher Quality. Economics Letters 55 267-271. David N. Figlio (2002) Can Public Schools Buy Better-Qualified Teachers?” Industrial and Labor Relations Review 55, 686-699.  Ronald Ferguson (1991) Paying for Public Education: New Evidence on How and Why Money Matters. Harvard Journal on Legislation. 28 (2) 465-498.

[3] Susanna Loeb and Marianne Page (2000) Examining the link between teacher wages and student outcomes: the importance of alternative labor market opportunities and non-pecuniary variation. Review of Economics and Statistics 82, 393-408. Susanna Loeb and Marianne Page (19980 Examining the link between wages and quality in the teacher workforce. Department of Economics, University of California, Davis

[4] David N. Figlio and Kim S. Rueben (2001) Tax limits and the qualifications of new teachers Journal of Public Economics Volume 80, Issue 1, April 2001, Pages 49-71