Introduction and Executive Summary
This report examines the potential for using performance incentives to improve the K-12 classroom education experience. It uses principles derived from economic theory to identify what type of incentives might work and what form those incentives should take. The limited literature on performance incentive applications in K-12 education is then examined to see if the evidence is consistent with the economic prescriptions.
This review reaches the following conclusions:
- Teacher-based performance incentives make the most sense conceptually, and appear to perform the best empirically. This confirms the theoretical notion that the classroom, as a production unit, faces weak, and sometimes perverse, incentives to perform optimally.
- School- and school-management based incentives appear to be ineffective, or less cost effective than teacher-based incentive schemes. The exception appears to be in the case where introducing profit-motivated management is an option.
- Student-based incentives appear to stimulate better test performance selectively. Because young people heavily discount the future, however, compensation needs to be immediate, making it more difficult to stimulate long-term performance. It also is unclear whether teachers will respond to greater student effort with increases or decreases in their own effort.
- Parent-based incentives likely are effective in stimulating reduced truancy and more parental involvement, at least in low-income households. Since parental oversight and effort improves school performance generally, stimulating that oversight with financial incentives likely will improve student performance and, perhaps, provide some stimulus to teacher effort.
In almost all of the studies reviewed, institutional and labor policy barriers limit the ability to implement and demonstrate the potential of incentive-based systems. Proponents of the status quo resist with great vigor attempts to make schools and staff accountable or to amplify market-competitive forces. Incentive programs will function more effectively if communities confront this issue, and reduce such barriers.
About Cascade Policy Institute: Founded in 1991, Cascade Policy Institute is Oregon’s premier policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility and economic opportunity. To that end, the Institute publishes policy studies, provides public speakers, organizes community forums and sponsors educational programs.
Cascade Policy Institute is a tax-exempt educational organization as defined under IRS code 501(c)(3). Cascade neither solicits nor accepts government funding and is supported by individual, foundation and business contributions. Nothing appearing in this document is to be construed as necessarily representing the views of Cascade or its donors, or as an attempt to aid or hinder the passage of any bill before any legislative body. The views expressed herein are the author’s own. Copyright 2008 by Cascade Policy Institute. All rights reserved.