Merit-pay plans for teachers may be growing more popular with politicians, but a report released Thursday argues that such compensation plans are rarely used in the private sector and can sometimes bring about unintended negative consequences.

During the 2008 presidential campaign, both President Barack Obama and his rival, U.S. Sen. John McCain, endorsed the idea of performance-incentive plans that would tie teachers’ pay to their students’ scores on standardized tests. Obama’s proposed fiscal 2010 budget, in fact, calls for boosting spending on the Teacher Incentive Fund, a program that awards grants to school districts to devise performance-pay programs, to $517.3 million, up from $97.3 million in the current year. But in Teachers, Performance Pay, and Accountability, the report published Thursday by the Economic Policy Institute, researchers point out that such pay plans are less common in the private sector than their proponents sometimes claim.
___________

"A general lesson from this part of the economy is that when you have jobs where it’s very hard to identify all the dimensions of productivity, and when it’s hard to measure all the individual contributions of productivity, formulaic pay plans tend to be suspect and to do more harm than good," ...
___________

http://www.epi.org/page/-/pdf/20090514_merit_pay_pr.pdf
___________

Thanks to Mark Pudlow for the lead.