Should They Pay, or Should I Go? Differential Responses to Base Salary Increases

Abstract

This study uses administrative data from Oregon to estimate the extent to which base salary increases reduce teacher turnover and to investigate whether these effects are heterogeneous by teacher characteristics. Using multiple sets of fixed effects to isolate plausibly exogenous variation in salaries across experience bands within a district, we find that increases in salary are associated with decreases in teacher turnover. In our fully specified model, we estimate that a 1 percent increase in current and future base salary is associated with a 0.13 percentage point decline in turnover. This relationship appears to attenuate for mid-career teachers. While increasing salary reduces turnover among special education and general education teachers, these effects are not statistically different from each other. We also find that teachers with only bachelor’s degrees are more responsive to salary increases than those with master’s degrees. Together, our results indicate the varied impact salaries may have in ameliorating teacher staffing challenges across different teacher characteristics.