Merit pay

Merit pay is a term that describes performance-related pay, most frequently in the context of educational reform or government civil service reform (government jobs). It provides bonuses for workers who perform their jobs effectively, according to easily measurable criteria. In the United States, policy makers are divided on whether merit pay should be offered to public school teachers, and other public employees, as is commonly the case in the United Kingdom.

Merit pay's roots lie in behavioral psychology and incentive theory. These theories are based in the belief that people are rational and react to incentives and that you can increase performance with the correct catalyst.

One example of a system that uses merit-pay is the Teacher Advancement Program (TAP) created by the Milken Family Foundation in 1999. TAP is currently in place in more than 180 schools all across the United States. In this program, salary raises are based on some aspects of teacher performance, measured by a combination of observations and student test scores. TAP teachers can advance their career in three ways: (1) remain in the classroom and become a mentor to others, (2) leave the classroom and become a master teacher, or (3) advance to administration through traditional means. This program is focused on helping teachers improve performance by learning from others. Teachers are put into small groups that—for a few hours each week—collaborate about what's working in the classroom. The opportunity allows teachers to build skills that will improve classroom learning.

Since adopting TAP in 2001, Bell Street Middle School has doubled the percent of students with advanced scoring in math and reading. The school has also reduced the number of students scoring "below basic level of math" by 46 percent. Another benefit of the TAP program for the middle school has been a reduction in teacher turnover from 32 percent to 10 percent.

One criticism of TAP is that it is expensive for schools, costing from $250 to $400 per student per year. Many TAP schools use grants to fund the program cost. An independent study conducted by Vanderbilt University researchers compared TAP schools' test score gains to non-TAP schools. TAP seems to do better at the elementary school level, but in fact does worse than non-TAP schools in grades 6 through 10.

In 2006, the United States Congress created a $600 million federal grant program called the Teacher Incentive Plan (TIF). In 2009, the program was expanded and supported with American Recovery and Reinvestment Act (ARRA) funding. According to the U.S. Department of Education, the TIF "supports efforts to develop and implement performance-based teacher and principal compensation systems in high-need schools." The program's goals include:

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