Are Teachers Fairly Compensated?

Tom Coyne of RI Policy Analysis offers this ProJo editorial on whether teachers are fairly compensated:

A growing number of Rhode Island communities are experiencing acrimonious contract negotiations with their teachers' unions. At the heart of these discussions lies the question of whether teachers are adequately compensated for their work and the results they produce. To answer it, we must examine the relative attractiveness of the three main parts of a teacher's compensation package: pay, health insurance, and pension benefits.

Because teachers reach the top step of their pay scale relatively quickly, we obtained the average salary for experienced Rhode Island teachers from the state's Department of Labor and Training. For elementary teachers, it is $64,700; for middle-school teachers, $61,680; and for secondary-school teachers, $63,240.

To make these salaries comparable to those earned by other professionals, we must adjust for the fact that teachers' contracts are for roughly 187 days' work a year, versus about 250 days a year for people in the private sector. Dividing teachers' pay by the factor 187/250 yields figures that are effectively comparable to those in the private sector: $86,497 for an elementary-school teacher, $82,460 for a middle-school teacher, and $84,545 for a secondary-school teacher.

Teachers often say that their pay should be compared to that of private-sector jobs requiring a master's degree. According to the Labor and Training Department, these include the jobs of statisticians, $57,360; clinical, counseling, and school psychologists, $72,100; urban and regional planners, $65,400; social scientists, $58,000; substance-abuse and behavior-disorder counselors, $32,680; clergy, $64,360; librarians, $58,840; and audiologists, $54,660. And let's round out the list with some other professions: lawyers, $96,580; accountants and auditors, $56,700; and personal financial advisers, $63,660.

So far, an experienced teacher's pay doesn't look too bad. But this actually understates the deal they have.

Let's start with the cost of health insurance. According to the Kaiser Family Foundation, state- and local-government employees across the country pay an average of 25 percent of their employer's total cost for a family Preferred Provider Organization health-insurance plan. In Rhode Island, teachers' unions (and state employees) have strenuously resisted proposals that they pay 10 percent or less.

Now let's move on to pensions...

A private-sector worker pays 6.2 percent of annual income (up to $90,000) into Social Security, or, if self-employed, 12.4 percent. The maximum Social Security benefit is now $23,268 per year, and a private-sector worker is not eligible for it until age 65 1/2 (a limit that rises each year). In contrast, a teacher is eligible for 80 percent of final salary after 35 years of service -- at age 58, if he or she started teaching right out of college at age 23. Eighty percent of $64,700 is $51,760 a year in retirement income, or $28,492 more than a private-sector worker receives from Social Security.

Moreover, the teacher's income increases by 3 percent each year, regardless of the actual level of inflation.

Now let's look at what our private-sector worker would have to do to match this deal...

To match the retired teacher's income and health-insurance package, our private-sector retiree would have to have accumulated savings of $800,117 by age 58.

What does it take to do this?...

To achieve $800,117 by age 58, our private-sector worker would have to save $10,820 (in real inflation-adjusted dollars) per year. Note that this is unrealistically low, because the actual annual returns do not equal their long-term average. This volatility means that a higher level of saving is needed.

Finally, let's make the unrealistic but simplifying assumption that our private-sector worker earns $64,700 over this whole period. To match the retired teacher's deal, our private-sector worker would have to save 16.72 percent of each year's compensation.

But let's assume that his or her employer matches the worker's 401(k) contribution, so the required saving level would be only 8.36 percent of each year's pay. Added to the 6.2 percent paid to Social Security, this yields a total saving rate of at least 14.56 percent -- about 5 percent higher than the 9.5-percent rate paid by teachers.

In sum, when you consider pay, health insurance, and pension benefits, public-school teachers in Rhode Island have a very sweet deal compared with most private-sector taxpayers.

Here is an editorial response by Robert Walsh, Jr., Executive Director of the NEA in Rhode Island.

Here is a perspective from Thomas Wigand, a Rhode Island resident.

Here is Tom Coyne's response to Bob Walsh.

Here is Michael Mancuso's letter to the editor response to Bob Walsh.