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Attract and Retain Teachers With a Strategic Compensation Model

All students deserve teachers who have the support, energy, and time to meet their individual learning needs. But many district leaders across the country are facing challenging teacher shortages—especially in districts in which most students experience poverty—that limit students' access to the great teaching they need to thrive.  

Many district leaders are considering raising compensation to improve retention and attract more people into the profession. But traditional teacher compensation models that focus on across-the-board salary increases aren’t meaningfully impacting teacher retention where it matters most. 

Strategic compensation models, however, enable district leaders to better attract new teachers and retain effective ones by differentiating pay based on experience and responsibility. Read our new paper to learn how strategic approaches to teacher compensation—along with other critical factors—can help foster a more rewarding, dynamic, and sustainable teaching job.




Teacher Compensation 101: Understanding the Basics

For educators and district leaders alike, compensation is always top of mind. How does compensation work, and why is it so important? Here’s a breakdown of key concepts.

What Is Teacher Compensation?

Teacher compensation is the annual pay teachers earn combined with benefits, such as health insurance and retirement funds. Some teachers also earn stipends or bonuses for effectiveness, increased responsibilities, or teaching hard-to-staff subjects or in high-need schools.

Districts typically spend 40-50% of their operating budget on teacher compensation—not including retirement and pension contributions, which can vary widely across states and districts. 

How Do School and District Leaders Typically Determine Compensation?

Even though there are thousands of school systems in the U.S., the structure of teacher pay varies little across the nation. The traditional and most common approach to teacher compensation is the “step-and-lane” model, in which teachers are compensated based on their years of experience (the step) and level of education (the lane). New teachers start at step zero and receive a step increase each year—typically about $1,000, which corresponds to a 2% salary increase for a new teacher—in addition to annual cost-of-living increases that are often negotiated a few years in advance.

Spending on steps and lanes can account for roughly 30% of a district’s total teacher salary budget, depending on their teaching force’s mix of experience and education. A teacher with a master’s degree earns $7,147 more annually on average than a teacher with only a bachelor’s degree and the same years of experience. Studies have shown that teachers with bachelor’s degrees are just as effective as those with advanced degrees, however, so districts that use this model aren’t receiving a strong return on their investment.



Use our teacher compensation calculator to learn how to calculate teacher salary based on educators’ starting amounts, experience, and education.


Average Teacher Salary: Where Are Teacher Salaries Highest and Lowest?

When adjusted for cost of living in each state, average teacher salaries in the 2021-22 school year ranged from $56,000 to $81,000, though averages can range even more across individual districts. The states that pay teachers the most include New York, Massachusetts, and Rhode Island, where education funding levels also tend to be highest. States with the lowest teacher salaries include Mississippi, Florida, and Arizona.

U.S. Department of Education, National Center for Education Statistics (NCES), Common Core of Data (CCD), Table 236.75: 2019-20 Fiscal Data – State Level and Table 211.60: Estimated average annual salary of teachers in public elementary and secondary schools, by state https://nces.ed.gov/ccd/elsi.

Salary adjusted for differences in cost of living using the Comparable Wage Index for Teachers (CWIFT) https://nces.ed.gov/programs/edge/Economic/TeacherWage.

How Do Teacher Salaries Compare to Others?

Inflation-adjusted teacher salaries have remained relatively flat for the past 25 years, according to the Economic Policy Institute (EPI), while wages for other college graduates have increased. Benefits also tend to comprise a higher proportion of total compensation for teachers compared to other professionals. Even so, the EPI estimates that teachers earned 14.2% less in total compensation than comparable college graduates in 2021.

Why Hasn’t Teacher Compensation Increased?

K-12 education spending has steadily risen over the past 30 years, but nearly all of that increase has gone toward adding more staff, rather than increasing teacher pay.

ERS analysis using data from NCES Table 213.10: Staff employed in public elementary and secondary school systems, by type of assignment: Selected years, 1949-50 through fall 2019; NCES Table 208.20: Public and private elementary and secondary teachers, enrollment, pupil/teacher ratios, and new teacher hires: Selected years, fall 1955 through fall 2031; NCES Table 211.50: Estimated average annual salary of teachers in public elementary and secondary schools: Selected years, 1959-60 through 2021-22.

In a traditional step-and-lane model, the cost of teacher salaries increases by 2-4% each year as teachers move up in experience and education level and the district implements cost-of-living adjustments. Therefore, even modest across-the-board increases are expensive for many districts, requiring leaders to make difficult tradeoffs that, in some cases, make teaching even more challenging.

What Are Different Teacher Compensation Strategies?

While most districts use the step-and-lane model, some modify it to withhold step increases for ineffective teachers. Others—such as those in Florida or Texas, where including teacher effectiveness is required by law—use an alternative model that considers teacher effectiveness ratings as one component for determining compensation.

Linking compensation to teacher effectiveness, while seemingly sensible, can actually be challenging. It’s most successful when district leaders comprehensively measure several components of effectiveness, including student growth, and use them to compensate teacher leaders or supplement teaching in high-need schools and hard-to-staff areas—not as direct pay incentives.

Including teacher effectiveness in these ways has proven to help leaders recruit and retain the strongest teachers where they’re needed most. Programs like ACE in Dallas—which offers highly effective teachers supplements of up to $10,000—have led to meaningful increases in student achievement in the lowest-performing schools.

Many districts offer supplemental pay to teachers in high-need areas, but few offer significant increases or limit eligibility to effective teachers. A growing number of states and districts, such as the DC Public Schools LIFT model and the Maryland Blueprint Legislation, are awarding significant stipends or compensation increases to teachers in leadership roles.

Districts that pay teachers more for… Percent of districts that pay any amount more  Percent of districts that pay effective teachers any amount more Percent of districts in which effective teachers can earn at least $5,000 more
Teaching in high-need schools 52% 23% 12%
Teaching hard-to-staff subjects 66% 3% 0%
Taking on increased roles 55% 20% 8%

To determine these percentages, we analyzed salary schedules for the 100 largest districts in the U.S., based on data from the National Council on Teacher Quality’s teacher contract database.

How Can District Leaders Design Strategic Compensation Models?

Competitive compensation is one piece of making teaching attractive and rewarding, and the way leaders approach it matters. Strategic compensation systems enable districts to retain strong teachers where they’re needed most by:

  • Rapidly increasing pay in teachers’ first few years to reduce attrition of high-potential teachers.
  • Paying teachers significantly more for teaching in high-needs schools and critical subject areas. 
  • Creating well-compensated teacher leadership pathways that link large pay increases to increased responsibility.
  • Establishing criteria to ensure teachers who have demonstrated effectiveness in raising student achievement receive increases.
  • Decoupling teacher pay from components that aren’t linked to student learning, such as advanced degrees.

Want to see how all of these connect? Explore our paper to learn about teacher compensation strategies designed to improve the sustainability of the teaching job.




Teacher compensation is just one way we can make the teaching profession more dynamic, rewarding, collaborative and sustainable. Learn more about redesigning the teaching job:


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