Merit Pay: The End Of Innocence?

** Also posted here on “Valerie Strauss’ Answer Sheet” in the Washington Post

The current teacher salary scale has come under increasing fire, and for a reason. Systems where people are treated more or less the same suffer from two basic problems. First, there will always be a number of "free riders." Second, and relatedly, some people may feel their contributions aren’t sufficiently recognized. So, what are good alternatives? I am not sure; but based on decades worth of economic and psychological research, measures such as merit pay are not it.

Although individual pay for performance (or merit pay) is a widespread practice among U.S. businesses, the research on its effectiveness shows it to be of limited utility (see here, here, here, and here), mostly because it’s easy for its benefits to be swamped by unintended consequences. Indeed, psychological research indicates that a focus on financial rewards may serve to (a) reduce intrinsic motivation, (b) heighten stress to the point that it impairs performance, and (c) promote a narrow focus reducing how well people do in all dimensions except the one being measured.

In 1971, a research psychologist named Edward Deci published a paper concluding that, while verbal reinforcement and positive feedback tends to strengthen intrinsic motivation, monetary rewards tend to weaken it. In 1999, Deci and his colleagues published a meta-analysis of 128 studies (see here), again concluding that, when people do things in exchange for external rewards, their intrinsic motivation tends to diminish. That is, once a certain activity is associated with a tangible reward, such as money, people will be less inclined to participate in the task when the reward is not present. Deci concluded that extrinsic rewards make it harder for people to sustain self-motivation.

Similarly, behavioral economist Dan Ariely and colleagues have shown that the introduction of extrinsic rewards cause an individual’s "decision frame" to shift from a social to a monetary orientation (see here). In a separate study, Ariely also demonstrated that financial rewards can dilute the signaling value of pro-social behavior (see here), to the extent that the presence of extrinsic incentives make it harder to tell if someone is motivated by a desire "to do good or to do well." Research also demonstrates that just activating the idea of money in somebody’s head can, by itself, reduce their pro-social behavior in subsequent and unrelated situations. For example, researchers Vohs, Mead and Goode (2008) showed that making money salient can later make you less likely to perform pro-social tasks, such as helping a stranger pick up a box of pencils that has been "accidentally" spilled (see here).

So, in a way, the money focus can mark the end of (social) innocence. How so? We may not always be able to distinguish which of our actions have to do with intrinsic motivation and which are rooted in the expectation of external rewards. But it’s quite clear that these two sources of behavior do exist, are quite distinct from each other, and speak different languages that should not be mistaken. If you bought flowers for a friend, you would be insulted if she handed you a $20 bill to show her gratitude – because it’s understood that money should not be mentioned (let alone offered) to obtain more of the things people do for joy or for love. In much the same way, some educators view performance pay as the kind of trespass or intrusion that is transforming the way we understand and talk about the practice of teaching.

What else happens when monetary incentives are brought in? As it happens, there is also now a growing body of applied educational research to suggest that the answer is: not much. Empirical studies conducted in Nashville, Chicago, and New York City and elsewhere have concluded that performance pay for teachers has little or no effect on their students’ test scores. So, essentially, these large and expensive experiments reveal what (inexpensive) experiments in other disciplines have been telling us for about 40 years.

I would think about this often if I was in charge of policy design and implementation. I would suspect that this trend toward quantification and measurement reflects and assumes too simplistic a view of human motivation. And I hope that it would make me want to see people as they are rather than as rational choice theory simplifies them to be. While rationality may be a useful assumption in economic theory, it should not become a straightjacket in policy.

Education, teaching and learning have much more to do with dedication, creativity, and commitment than bonuses, incentives, and perks. Some might still say that the labor market behavior of teachers and potential teachers can still obey the laws of market economics. Absolutely. But by changing the rules (i.e., bonuses) we are changing the game (i.e., education) and the players (i.e., teachers).

There is no doubt educators need to be paid fairly – nobody is suggesting otherwise. I am also not suggesting that some creative thinking and experimentation in teacher compensation isn’t warranted. That said, do we want our teachers to be the kind of people who would freely help pick up those pencils or the kind who would only help if you pay them extra? So the real question is, do we want our educators to be motivated primarily by market norms or by social norms? We probably can’t have it both ways – this may actually be an either/or issue.

- Esther Quintero