Rewarding Performing Teachers? theory, evidence and UK policy

The government's attempt to create a 'new professionalism' amongst British teachers has been accompanied by plans to extend performance related pay. The latter advocacy suggests the rejection of the co-operative/collegiate model of teacher remuneration and its replacement by one emphasising targeted incentives given the presence of incomplete employment contracts. This contract/agency approach recognises that performance pay is likely to generate dysfunctional behaviour, particularly in multi-tasked occupations such as teaching. The analysis of professional labour markets and nonprofits explains how the presence of asymmetric information and externalities provide a rationale for the widespread compliance by teachers to a code of professional ethics. This compliance is likely to be weakened by the extension of performance related pay. A decline in the 'old professionalism' necessitates the further extension of costly monitoring and regulation. This analysis, together with previous experience, suggests that performance pay will alter teacher behaviour and thus the composition of schooling outputs. The multi-tasked nature of a teacher's job, the incomplete nature of available performance indicators, the complex set of potential responses to incentive pay and the variety of Government proposals preclude more specific conclusions.