School Districts Ignoring Labor Market Signals

Just like the market for any other good or service, labor markets are governed by the invariable laws of supply and demand. When the quantity of a good or service increases, prices tend to go down, and when supplies grow tight, prices tend to rise. In light of this reality, it’s worth considering the following report on the quantity of qualified teachers in Michigan.

Earlier this month, MIRS News (subscription required) followed up on reports that public schools posting teacher job openings were receiving hundreds and even thousands of applications. For example, according to the Macomb Daily, the Chippewa Valley school district received almost 19,000 applications for just 71 teacher openings last year. MIRS asked around, and discovered that the Grand Blanc and Wayne-Westland districts also received hundreds of applications for each teaching vacancy.

A Grand Rapids Press article from last year corroborates the trend, stating that “competition is fierce” for landing teaching jobs.

These anecdotes suggest that these school districts and perhaps many others could meet their demand for teachers at a much lower prices than they are now offering. Currently, starting salaries in Grand Blanc are $37,057, in Wayne-Westland $36,069, and in Chippewa Valley $38,635. By heeding the market signals being sent by the huge supply of applicants, school districts could potentially make better use of their resources by reducing starting salary levels and still have no problem filling their demand for new teachers.

But salary levels themselves might not be the only factor drawing so many applicants for these positions. Other forms of teacher compensation also might be attracting applicants, including paid time off, generous health insurance benefits, a “defined-benefit” pension and more. There are also less tangible factors that attract would-be teachers, such as a personal desire to work with kids.

For employers, paying attention to the market signals sent by supply/demand imbalances means they need not understand all the reasons different individuals might be attracted to a certain job to find a more cost-effective way of attracting the human capital they need to be successful.

Unfortunately, school districts completely ignore these signals by agreeing to pay all teachers exactly the same no matter their skill, productivity, value or demand. Such behavior is not just a matter of paying too much, however; it also affects quality. While often represented as being “fair,” paying teachers like industrial assembly line workers is actually unfair to students, to more-effective teachers, and to the taxpayers who foot the bill.

Effective teachers are a school’s greatest resource; educational research demonstrates this clearly. By tuning out the signals being sent by the market for teachers, school districts prevent taxpayers and parents from receiving the most cost-effective and productive educational services.