Unified salary schedule and student SAT scores: Adverse effects of adverse selection in the market for secondary school teachers

The use of the unified salary schedule for secondary school teachers, where pay is based solely on the years of schooling and teaching experience, results in adverse selection in the market for teachers. Alternative salaries for mathematics and English teachers are compared with teaching salaries. Unlike prior studies of this issue, this paper empirically examines the effects of these salary structures on learning outcomes. Higher alternative (nonteaching) wages for teachers of any subject (mathematics or verbally oriented) result in the relatively able people leaving or staying away from teaching, which in rum adversely affects student performance in these subject areas. It is found, using data for the U.S. between 1985 and 1991, that there is a strong negative effect of the opportunity cost of teaching in a specialty on the performance of students in that area, evidenced by student scores in the SAT quantitative and verbal sections. (C) 1997 Elsevier Science Ltd.