Monday, May 17, 2010

Does It Pay to Teach?

Well, in my blog The Death of a Teacher nearly a month ago, I alluded to the fact that teachers’ compensation is not very high in U.S. compared to many other professions.  I did consciously avoid further discussion on this issue then so that I would not be wondering off the main topic of that blog.  Like I said then, it is not productive to argue what is fair compensation since you and I both know the answers would vary widely depending on whom you ask and how each of us formed our opinions.  It is however always useful to look at some real data so that we at least can separate the rhetoric and subject opinion from objective facts.  Below I will focus mostly on the K-12 education system of New Jersey where we live.

New Jersey has about 110 thousand K-12 public school teachers who work for over 400 school districts in 21 counties.  By absolute dollars, New Jersey’s public school teachers are among the highest paid in the nation which is not surprising nor alarming by itself when you consider New Jersey’s cost of living is one of the highest in the nation, similar to California and some of the northeastern states like New York and Connecticut.  In its May 16th article N.J. teacher salaries debate continues amid Gov. Christie's school aid cuts, Star Ledger, a major local newspaper of New Jersey did some analysis about this hotly debated issue given the recent school budget votes and politics.  The bottom line is that over 90% (50%) of these 110 thousand teachers earn a salary between $40-90K ($40-$60K, respectively) in the 10-month 2008-2009 school year.  The median (i.e. 50th percentile) is about $57K and less than 2% of them made over $100K.   What caught people’s attention and surprise is the pay scale for administrators.  In New Jersey, there are 235 of them making more than $175,000 a year.

Public school teacher’s compensation (salary and benefits) are usually determined through contract negotiation between each local school board who represent its tax payers and voters and the corresponding local teacher union who represent the teachers of the district.  As a result, the compensation varies significantly between different districts and quick generalization across the districts bound to fail.  It is generally true however that salary has been a strong function of seniority or year of service rather than performance (which is not so easy to measure). Typically one starts with a published starting salary and then gets a % raise each year that is determined by the agreed-upon contract which is usually independent of years of service.  To give you a reference point, for New Jersey public K-12 schools, the cumulative salary increase over the last 20 years was about 20% which translates to a less than 2% annual salary increase.   Note the average starting salary of K-12 public school teachers in New Jersey is about $38K now. 

According to a recent survey result of Annual pay is for bachelor's graduates without higher degrees, at an average $36,200 starting salary and an average of $54,100 mid-career pay (i.e. graduates with 15 years experience), education is the 7th lowest pay degree in terms of the mid-career pay. It is a little higher than those in social work, theology, music, etc.  By the way, the best paying degrees according to the same survey, are in some of the sciences and engineering disciplines with a mid-career pay of around $100K.

Of course, there are rewards.  The most significant one cannot be measured in monetary terms, if you ask any teacher worth his or her salt.  It is when a teacher sees his/her student respond positively and grew significantly.  It is even better if the teacher feels that he/she had made a positive change to student’s life!  Free time wise, teachers do have a little more during the summer and winter breaks beyond some developmental work and school responsibilities, after you subtract off vacation days that private industry employees get.  Many however do do some free-lance work to supplement their 10-month school year income.  Public school teachers do have better job security in general, compared to many in private industry, primarily due to the stability of the demands and public funding priority in education.

In terms of health care benefits, many (but not all) New Jersey teachers belong to the New Jersey Public Sector Employee pool (SHBP) with the cost paid for by the employers until recently.  Going forward, they are expected to pay for a portion of it in addition to existing co-pays for medical expenses and prescriptions.  According to a one-year old data in Real Number on NJ Health Care Costs, NJ SHBP pool spent $3.6 billion in 2007 that covers about 780,000 employees, retirees and their qualified dependents (there were almost 450,000 of them).  That translates to about an average annual health care cost of $4500 per person covered.  Note large pools of private or public entities often choose not to buy insurance policies for its employees and instead, they pay for the actual expense plus a service fee for the managing carriers like BlueCross BlueShield like the NJ public employee pool case here.  Thus you can easily account for the financial value of the health care benefit when estimating their total compensations.  The figure is not all that different from those of private industry employees.

To complete the pictures of total compensation, let us look at the public K-12 school teachers’ retirement benefits as well (public colleges and universities are different).  Although I have not verify the details, I would assume a vast majority, if not all, of the school board employees including teachers had opted to join Teachers' Pension and Annuity Fund (TPAF) which is one of the NJ state retirement benefit systems(others include the defined contribution 403(b) plan and two other pension systems -Public Employees' Retirement System (PERS) and Police and Fireman's Retirement System (PFRS)).   Currently, TPAF member teachers can retire at age 60 and begin to receive traditional life time pension like many government employees and some employees of larger private corporations.  The amount of pension, that is, the dollars amount a retiree receives annually for the rest of life is a percentage of essentially the average of the last three years before retirement.  The percentage is computed as “years of service/55”.  Thus it takes 55 years of services for one to continue receiving the full salary.   And one can expect to receive about 60-70% of the last salary after 33-40 years of services which is pretty good and more generous than most private for-profit corporations that I know of, if they still offer pension benefits.  Of course, with the current debate and pressure on cost cuttings in New Jersey, I would not be surprised that such pension benefit will be reduced in near future.

Well, we have walked through typical compensations of teachers of K-12 public schools in New Jersey.  Hopefully you now have a more clear idea if it pays for you to teach in terms of financial considerations and few intangibles.  But don’t forget, it is just like with any other professions, the ultimate determining factor of success is passion which you may already have or may develop over time.  If you have a heart for teaching, go for it.  Its pay is awesome!

Talk to you soon!

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