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The labour market for Australian teachers. Paper presented at Making Schools Better: a summit conference on the performance, management and funding of Australian schools, University of Melbourne, 26-27 August 2004

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The Labour Market for Australian teachers*

Beth Webster** and Mark Wooden**, Gary Marks†** **Melbourne Institute of Applied Economic and Social Research, The University of Melbourne and

†Australian Council for Educational Research



26-27 August 2004 Melbourne

August 2004

*The authors would like to thank Paul Jensen for thoughtful comments on this paper.

Melbourne Institute of Applied Economic and Social Research The University of Melbourne Victoria 3010 Australia Telephone (03) 8344 2100

Fax (03) 8344 2111 Email

WWW Address



Educational practices and teaching methods have a large influence on the quality of educational

services, but comparatively less is said about the labour market arrangements for teachers although

they are arguably as important. This paper examines whether current institutional features of teacher

labour markets are hindering improvements in the quality of teaching in Australia. We argue that

entrenched inflexibilities in the payment system have contributed towards both chronic shortages of

qualified teachers in specialized teacher labour markets and poor incentives for excellent teachers to

remain teaching.

We maintain that, on balance, increased flexibility for schools to remunerate their staff according to

performance will, first, encourage more and superior graduates to train in the teaching sub-disciplines

where there are shortages, and secondly, enable schools to retain good instructors and superior youth

mentors as teachers. There is no evidence that there are chronic teacher shortages across all disciplines.

Potential shortages over the next decade caused by retirement by the aging stock of teachers could well

be offset by contemporaneous increases in teacher training positions.

The next section of this paper examines teacher labour markets and discusses how the major

institutions that govern demand and supply for teachers operate. Section three presents evidence that

the labour market for teachers operates inefficiently as evidenced by chronic shortages in some

disciplines and attrition of experienced teachers. Section four examines evidence on what attracts

people to teaching and retains them in teaching and section five canvasses policies which resolve

shortages and encourage exceptional performance by working teachers.

2. How teacher labour markets operate

A labour market is composite of sellers of labour services, in this case qualified teachers, and buyers of

these services, school systems and school principals. Conventionally, the market is defined by the

factors that drive demand for these services and a second set of factors that determine supply. With

respect to the former, the dominant factors governing the demand for teaching services are the number

of people of school age, educational retention rates, the ratio of students to teachers and the cost of

hiring teaching services.


The effective current labour supply of qualified teachers includes all such people who, at any point in

time either worked as a teacher in Australia or actively sought a teaching job.1 This supply is

determined by the relative pecuniary and non-pecuniary rewards to teaching compared with alternative

occupations. Non-pecuniary rewards include the conditions of employment, such as the provision of

auxiliary staff, teaching aides, class sizes, teaching hours per week and annual holidays, employment

tenure, superannuation, long service leave. In addition non-pecuniary rewards include other forms of

leave, provision of on-going professional development training; job opportunities and thus the ease of

obtaining a preferred job. The supply of qualified teachers can be limited by institutional processes

within universities that determine the number of teacher training positions on offer; the encouragement

given to the immigration of teachers to Australia; and the costs of acquiring teaching qualifications.

The unrelated nature of these two sets of determining factors mean that unless there are inherent

features within each labour market acting to equate the amount demanded with the amount supplied,

the labour market will only be in balance by coincidence. Two forces which can balance labour

markets include first, the relative rewards from working (earnings and conditions of employment) and,

secondly, job opportunities relative to alternative markets open to the suppliers of labour.2

In Australia, the teaching labour markets represent a comparatively large section of the labour market

with a workforce in 2002 of 255 000 teachers representing 3 per cent of the employed labour force.3

However, it is mistaken to suppose that there is a single market for teachers. In practice, the teaching

labour markets are segmented according to the major level of schooling - primary and secondary - and

within the secondary school labour market there are sub-segments reflecting specific subject areas.

Markets are segmented when the type of skills supplied in one market differ substantially from another,

to the extent that one type of labour cannot be a substitute for another without considerable loss of

productivity. A senior English teacher, for example, is not a good substitute for a senior maths teacher.

1 However, roughly one third of all people who take jobs in the economy are not actively looking for work but are induced to take employment because of attractive job offers. Accordingly, the concept of labour supply is fuzzy and includes graduations according to the intensity of desire for teaching employment.

2 Balance may also be achieved through the demand side through similar factors. Difficulties of procurement and higher prices may drive consumers to other markets.

3 ABS Schools, cat. 4221.0. However, the ABS census of Population and Housing estimate the number of qualified primary and secondary teachers in 2001 is 126 000.


Segmentation is a graduated concept but it assumed here that markets are segmented if at least an

additional year of training is required to qualify workers from one market to enter another.4

Table 1 and 2 which present data on the labour force status of qualified teachers shows that there has

been a considerable loss of qualified teachers from the profession. In 2001, 27 per cent of all qualified

teachers were employed in occupations other than teaching, while just under half are employed in the

level of teaching appropriate to their qualification. The unemployment rate at between 2 and 3 per cent

is very low for both primary and secondary school teachers. According to Table 2, nearly two thirds of

qualified for primary and secondary teachers respectively were employed by the government sector.

Table 1: Labour market status of qualified teachers 15 to 54 years, percentage distribution, Australia, 2001


Teaching qualification(a) Primary School Teachers

Secondary School Teachers

Other (b) Unemploy ed

Not in the Labour force


Primary 44.8 0.9 27.2 1.1 25.7 100.0

Secondary 1.9 49.0 27.8 1.3 19.8 100.0

TOTAL 28.7 19.0 27.5 1.2 23.5 100.0

Note: (a)

Refers to highest qualification. Only about 75% of people with an education qualification (as one of their 3 top qualifications) state education as this highest qualification. This is related to age. 93% of 20-24 year olds who have an education qualification claim it is their highest qualification, compared with 66% of 50-55 year olds (ABS 1997 Survey of Education and Training, unpublished data). (b)


occupation not stated. Source: ABS 2001 Census of Population and housing, unpublished data.

Table 2: Percentage distribution of qualified(a) teachers employed in schools by government and non-government sectors, Australia, 2001

Sector Primary School


Secondary School Teachers Total teachers

State/Territory Government 67.1 62.4 65.3

Private sector 30.4 34.7 32.1

Other industry sector 1.1 0.8 1.0

TOTAL 100.0 100.0 100.0

4 Teaching labour markets are not segmented by school sector. A qualified maths teacher with two years experience in the government sector is perfectly substitutable for a qualified maths teacher with the same experience in a non-government school. Nor are teaching labour markets segmented by employment contract. Casual, fixed term and tenured teachers

supply the same teacher services to schools. While they differ in according to their expected job duration and effective hourly wage rate, the content of provided services are the same.


Note: (a)

Refers to highest qualification. Only about 75% of people with an education qualification (as one of their 3 top qualifications) state education as this highest qualification. This is related to age. 93% of 20-24 year olds who have an education qualification claim it is their highest qualification, compared with 66% of 50-55 year olds (ABS 1997 Survey of Education and Training, unpublished data). Source: ABS 2001 Census of Population and Housing, unpublished data.

According to the data on teacher outflows presented in Table 3, about 6 per cent of both primary school

teachers and secondary school teachers leave teaching each year. Only one in five of those who leave

primary school education take up work in another occupation and the remainder stop working,

presumably for family reasons or retirement. One in four of secondary school teachers who leave

secondary teaching move to other occupations.

Table 3: Outflows of people from teaching over the last year, average flows from 1998, 2000 and 2002, Australia



Other occupation s

Not working TOTAL

Occupation last February Primary Secondary

Primary teaching 93.4 0.0 1.4 5.0 100.0

Secondary teaching 0.0 93.4 1.6 4.9 100.0

Other occupations 0.0 0.0 93.2 6.6 100.0

Not working last February 0.5 0.3 75.6 23.6 100.0

TOTAL 1.3 1.3 88.9 8.4 100.0

Source: ABS Labour Mobility Surveys, 1998, 2000, 2002 unpublished data.

Over the same period, the gross annual inflow rate into primary school teaching was 6.3 per cent and

most of these were not working prior to the current year (see Table 4). Many would have been studying

for their teaching qualifications but some would also have returned from employer granted leave. One

in three entered primary teaching from another type of work. The annual gross inflow rate into

secondary teaching was 5.8 per cent. However, similar to outflows from secondary teaching, there was

a slightly higher rate of inflow from other occupations compared with primary school teachers.

Together, these data suggest that flows of school teachers occur mainly between the non-working

sector and teaching, rather than other occupations (most likely for personal reasons). However

secondary teachers are slightly more likely to move between teaching and other labour markets than

primary teachers. To the extent that these latter flows are sensitive to the pecuniary and non-pecuniary

compensation for teaching, they are amenable to change by employers. Affecting the primary gross

flow rates may be less easy to affect by direct pecuniary incentives but may be influenced by factors


such as the flexibility of hours of work, availability of job sharing and employer based child care and

superannuation rules.

Table 4: Inflows of people into teaching over the last year, average flows from 1998, 2000 and 2002, Australia



Other occupation s

Not working TOTAL

Occupation last February Primary Secondary

Primary teaching 93.6 0.0 0.0 0.8 1.3

Secondary teaching 0.0 94.0 0.0 0.7 1.3

Other occupations 2.0 3.0 90.7 67.9 86.5

Not working last February 4.3 2.8 9.3 30.6 10.9

TOTAL 100.0 100.0 100.0 100.0 100.0

Source: ABS Labour Mobility Surveys, 1998, 2000, 2002 unpublished data.

3. Do teacher labour markets operate optimally?

Our concern in this paper is whether the current labour market arrangements with respect to wages and

the provision of training places, enhances educational outcomes by acting appropriately to counter

chronic imbalances in the labour market and by attracting and retaining the most promising and

talented school room instructors. This section examines evidence that to date, the system has not

performed as effectively as it could have. There are two indices of inefficient operation: first, chronic

teacher shortages in certain disciplines and secondly, excessive attrition of the most able teachers to

other occupations.

Teacher shortages

A teacher shortage exists when employers cannot fill their desired number of positions from the start of

the school year, with appropriately qualified teaching staff at the going wage. Considerable resources

are expended by State governments across Australia to regularly assess whether teaching markets are or

will be in shortage, surplus or balance. In most States a series of market demand and supply

questionnaires are administered to principals on a regular basis. Unfortunately, the nature of the

questions used in the various surveys is neither consistent nor aligned to the exact labour market

meaning of a shortage and most only cover the government sector.

In addition, a number of models have been constructed to produce forward projections or forecasts of

teacher demand and supply based on demographic, education and labour force data. Most jurisdictions


segment their forecasts by primary and secondary school levels and some (SA, WA, Queensland,

NSW) make attempts to further disaggregate the latter by subject. In addition NSW segment by region.

Queensland offers a menu of services from close fortnightly monitoring of vacancies to annual models

for advice to the treasury to 10 year forecasts. In SA and Tasmania, projections from a forecasting

model are modified by expert opinion from placement teams. WA produces forecasts for a 5 year

horizon and NSW uses a 7 year horizon. Victoria conducts two regular surveys of government schools

for this purpose.5 At the national level, DEWR (previously DETYA) produces forecasts (on behalf of

the CESCOE Working Party on Supply and Demand for teachers, see Preston (2000) and MCEETY


Having a small field of applications for a job vacancy does not constitute a prima facie shortage, as

suggested in the literature, but implies that the market is close to a state of balance. Having no

applications is a shortage. Evidence that schools are increasing their search activity does not constitute

a shortage but may also indicate that the market is getting close to a state of balance. Limiting the

number of school students who can take a subject because of lack of teachers, reducing the (supervised)

class hours for students below normal, employing teachers to teach subjects they are not fully qualified

for (this may take the form of excessive use of relief teachers) or raising the size of classes beyond

normal are indicators of a teacher shortage and a reduced level of service to students.

Alternatively, it is not correct to assume that since there is a teacher in front of every class that

shortages do not exist. Limiting the number of school students who can take a subject because of lack

of teachers, reducing the (supervised) class hours for students below normal, employing teachers to

teach subjects they are not fully qualified for (this may take the form of excessive use of relief teachers)

or raising the size of classes beyond normal are indicators of a teacher shortage and a reduced level of

service to students. Few studies consider surpluses of teachers.

Nonetheless, most of these surveys reveal information, which together with informal evidence indicate

chronic shortages in secondary science (physics and chemistry), maths, ICT and technology subjects,

5 However, while the labour market analyst’s definition of a shortage is not the same as common usage, current questionnaires tend to reflect this usage rather than the analyst’s definition. A shortage in existing questionnaires is loosely defined as any area the principal claims to have had recruitment difficulties or a shortage in during the current



LOTE and some rural locations. For example, the committee 2003, p 58) reports that 30 per cent of

year 12 mathematics and 20 per cent of year 12 science teachers has not completed mathematics or

science respectively to at least the third year of university. Twenty-eight per cent of year 8 mathematics

teachers were not qualified in mathematics or mathematical education. There is also some evidence of

cyclical swings in overall teachers shortages and surpluses throughout the last four decades (Burke

1994). Moreover, chronic shortages in maths and science and in poor or remote schools appear to be

world-wide (see Milanowski 2003).

Attrition of the most able teachers

An effective labour market should not only attract and retain the required blend of skill - in our case

the correct mix of teachers by discipline - but should also attract and retain the most able and best

performing teachers. There is no Australian evidence on who are the most likely teachers to leave but

US studies have shown that teachers with the highest test scores (SAT and National Teacher Exam) are

most likely to leave Henke et al. (2000), Murnane et al. (1991), Schlecty and Vance (1981) Weaver

(1983). Murnane et al. (1991) found that secondary teachers, those qualified in physics and chemistry

and the lowest paid teachers, had the highest attrition rates. According to Inersoll, personal reasons and

lack of job satisfaction (including poor earnings) account for most of the reasons for leaving teaching in

the US.

4. Evidence on what attracts people to teaching (and keeps them there)

In order to devise policies to enhance the attraction of graduates skilled in the discipline areas with

shortages and those with superior teaching skills, we need to understand the career motivations of

potential and existing teachers. The major determinants of the quantity and quality of teachers relate to

the labour market aspirations of professional workers and graduands in general, and the institutional

regulations and conventions that govern the Australian teaching labour market.

Non-monetary factors inevitably influence a person’s career decisions and teachers are no different

from other occupations in this respect. Many of these non-pecuniary motivations and preferences are

either part of the individual’s intrinsic personal preferences or relate to characteristics of the student

body over which school administrators and policy makers have no control. For example, Australian,

US and UK empirical studies have identified both plans for family formation (Dolton et al. 2003,


Bempah 1994), the desire to work with children (CRTTE 2003, Bradley 1983, Tusin 1999,)

Milanowski (2003) and altruistic motives (Ben-Shem & Avi-Itzah 1991, Young 1995) as factors

effecting the decision to enter the teaching profession. Once trained, other studies have found that the

choice of school was affected, inter alia, by the characteristics of the potential pupils such as family

income, race and academic ability (Hanushek et al. 1999), home ownership (Bempah 1994), the

leadership style of the school administrator (Bempah 1994).


While these factors convey a plausible resonance, they provide little guide for school managers and

principals who want to know how to increase the attraction and retention of the best and scarcest

teachers. From a policy perspective, we want to know, given graduates personal motivations, what

variation in pay or other employment condition are required to attract and retain them as teachers. Most

specifically, we are interested in the motivations of (potential or actual) teachers in the shortage

occupations and the most able teachers. A considerable number of overseas studies have found that

either recruitment or retention, once other factors are held constant, are quite sensitive to the variations

in pay and these include Zabalza et al. (1979) Manski (1987) Dolton and Mavromaras (1994), Gritz

and Theobald (1996),) Hanushek et al. (1999), Dolton and van der Klaauw (1999), Dolton et al. (2003)

Murnane et al. (1991) and Milanowski (2003).6

Different types of teachers have differing sensitivities to pay variations. Zabalza et al. (1979) for

example, found that the supply of male teachers in the UK was quite sensitive to wage variation (a 10

per cent increase in wages lead to between 24 to 39 per cent increase in supply), compared with female

teachers. While both men and women were similarly affected by changes to starting salaries, the

retention of male teachers was much more responsive to wage growth over time. Looking at US data,

Hanushek et al. (1999) found that over the period 1993 to 1996, a 10 per cent rise in starting salaries

was associated with a 2 per cent fall in attrition on new teachers.

With respect to the quality of teachers both Figlio (2002) and Murnane and Olsen (1989, 1990) have

found that salaries affect the quality of education of the selected teachers. Milanowski (2003) has

argued that maths and science college graduates are highly motivated by earnings and generally few of

6 See also Dolton and van der Klaauw (1995), Dolton and Makepeace (1993), Murnane and Olsen (1990), Dolton (1990).


them ascribe much value to the non-pecuniary rewards from teaching. If this is generally true, then the

shortage of maths and science teachers may arise because the pool of maths and science graduates who

are attracted to the type of work teaching involves is lower than the humanities and social science


Earnings are of course defined relative to what the graduate could earn in other occupations and three

studies have looked explicitly at comparative earnings, despite the difficulties of defining

‘comparative’.7 Both Stinebrickner (2001) and Goldharber and Lui (2003)found that once qualified,

teachers with higher academic ability scores were less likely to enter teaching and more likely to leave

teaching for other occupations since their outside incomes were higher. Hanushek et al. (1999) found

that districts with higher salaries tended to recruit teachers with better teacher test scores, but higher

teacher test scores did not appear to translate into better student achievement, ceteris paribus.8

Nonetheless, from an a priori perspective, higher salaries should attract a larger pool of applicants

which accordingly gives schools the basis for selecting better quality teachers, however defined.

There appear to be no analytic studies of the labour market motivations of teachers in Australia and

instead we examine data on the teachers’ stated preferences, relative earnings and job satisfaction of

teachers compared with their peer professions. A recent survey by MCEETYA9 on the main factors that

would assist retention listed remuneration as the top factor over reduced workloads, improved

employment conditions.

Data on both job satisfaction and earnings, suggest that overall, teachers are not worse off than

comparable professional occupations. Consider first teachers’ pay situation. If it is assumed that

teachers take 12 weeks annual leave per year, then in 2000 school teachers were paid about 20 per cent

above the hourly rate for other professional employees. If it is assumed that teachers take the same

amount of annual leave as other professional workers, then their hourly earning rate, $25.00, was the

same on average for all employee professionals. Table 5 presents annual earnings for the major

7 See Goldhaber & Player (2003) on this point. 8 They could not exclude the possibility that the link between salaries and teacher attraction was truly casual as wealthy

districts also had the students who were more attractive to teach. The short length of the panel made it difficult to clearly disentangle these factors. 9 Cited in Committee (2003, p 92).


professions that teachers could regard as alternative forms of employment. If teachers take 12 weeks

annual leave, only IT professionals have higher hourly rates of pay.

Table 5: Average weekly earnings for full-time adult non-managerial employees, Australia, May 2000

Average weekly


Hours per week

Earnings per hour

School teachers (4 weeks leave) 898.4 36.0 25.0

School teachers (12 weeks leave) 898.4 30.0(a) 29.9

Natural and physical science professionals 1046.2 38.7 27.0

Accountants, auditors and corporate treasurers 818.4 37.8 21.7

Sales, marketing and advertising professionals 936.3 38.1 24.6

Computing professionals 1210.3 38.4 31.5

Miscellaneous business and information professionals

929.9 38.1 24.4

Miscellaneous social professionals 1094.3 37.2 29.4

All professionals 967.3 37.7 25.7

Notes: (a) Teachers hours have been adjusted on the assumption that they work 40 weeks per year compared with 48 for other occupations. Source: Employee Earning and Hours. ABS cat. 6306.0, Table 13.

Pay, however, is affected by many factors, including age, experience and education. School teachers

are, on average, both older and more experienced than workers in most other professions. Further, a

post-school qualification is usually required for entry into the teaching profession, and typically

workers with post-school qualifications can expect to earn more. If hourly earnings are adjusted for

age, tenure, experience and educational attainment, and a host of other personal and job-related

characteristics, but not weeks of annual leave, school teachers do in fact fare relatively poorly

compared to other occupational groups.10 The results from this adjustment are reported in Table 6.

Given their endowments, school teachers would appear to be far more lowly paid than all other

professional occupations except nurses (the estimated differential is 5.3 per cent in favour of nurses but

it is not statistically significant) and social, arts and miscellaneous professionals (a disparate group that

includes, among others, lawyers, social workers, religious ministers, photographers, musicians and

artists).11 However, as noted, this analysis does not take into account actual annual leave taken by

teachers as there is no information on this in the data set. If most teachers took the maximum leave of

10 As is conventional, hourly earnings was specified as a log function and regressed against variables representing sex, age, tenure, occupation experience, educational attainment, marital status, race, country of birth, health, union membership, employment contract status, employment sector (public or private), workplace size and occupation. The adjusted R-

squared value obtained was 0.33. 11 Again, however, this result might be affected by calculating hourly earnings based on data on hours worked over the

entire year rather than over a usual week. If teachers work relatively fewer hours over a year then the measure of hourly pay based on a usual week will be biased downwards.


12 weeks, and accordingly 20 per cent less work, then the pay differential would move very much in

the teachers favour.

Table 6: Hourly Wage Differentials: School Teachers Compared with Other Professional Occupations, Australia, 2002


Estimated % of teacher pay, after controlling for age, experience etc

School teachers (4 weeks leave) 100.0

School teachers (12 weeks leave) 120.0

Other education professionals 114.3

Nursing professionals 105.3

Other health professionals 130.5

Science, building and engineering profs 110.1

Business and information professionals 120.6

Social, arts and miscellaneous professionals 99.9

Associate professionals 110.1

Source: Households Income and Labour Market Dynamics in Australia (HILDA), University of Melbourne, 2002

Data from 2002 are also available in the comparable level of job satisfaction. Respondents were asked

to rate on a 0 to 10 scale how satisfied they were with their job overall and with five specific aspects of

that job. A summary of these data disaggregated once again by occupation categories is reported in

Table 7 and Table 8.

Compared with other employees, and especially other professional employees, school teachers are

highly satisfied with the security of their job (only health professionals score higher) but relatively

dissatisfied with the hours they work and how their working hour arrangements impact on their ability

to balance work and non-work commitments.

When all aspects of the job are considered, however, school teachers are relatively satisfied. Close to

two-thirds of school teachers score 8 or above on the 0 to 10 scale, suggesting very high levels of job

satisfaction in the main. Moreover, their mean level of satisfaction is higher than in most other

professions, though with the exception of nurses, such differences are not statistically significant. This

is further confirmed by regression analysis. When job satisfaction was regressed against a wide range

of personal characteristics (such as age, sex, marital status, educational qualifications and health) as

well as occupation, no evidence was found that teachers were any more or less satisfied than workers in

most other occupations (with again the possible exception of nurses).12

12 Estimation was undertaken using ordinary least squares (adjusted R-squared = 0.28). When re-estimated using an ordered probit model the results were qualitatively unaffected.


Differences in satisfaction with pay between teachers in the public and private school systems and

between teachers employed in different States, were small and not statistically significant (see Table 8).

Table 7: Job satisfaction by occupation: Mean score (0-10 scale), 2002

Satisfaction with: Occupation

Pay Job

security Work itself Hours worked Flexibility

to balance work & non-work

Overall job

School teachers 6.87 8.32 7.87 7.06 6.50 7.73

Other educational profs 6.77 7.41 8.17 7.00 7.44 7.58

Nursing professionals 5.86 8.62 7.32 6.81 6.92 7.18

Other health profs 7.19 8.59 8.03 7.40 7.34 7.87

Science, bldg etc profs 6.60 7.16 7.85 6.96 7.79 7.59

Business, info profs 6.88 7.29 7.58 7.14 7.61 7.46

Social profs 7.13 7.86 7.98 7.15 7.69 7.84

Associate profs 6.72 7.85 7.74 6.96 7.23 7.62

Other occupations 6.58 7.60 7.54 7.14 7.43 7.62

Source: Households Income and Labour market Dynamics in Australia (HILDA), University of Melbourne, 2002

The apparent absence of any difference across occupations in satisfaction with pay is of some interest.

One explanation for this may lie in how hours are measured. If it is accepted that full-time teachers, on

average, work relatively fewer weeks per year than workers in other occupations, then it follows that

the earlier analysis of hourly pay differentials will tend to understate teachers’ pay relative to the pay

received by other workers. Alternatively, satisfaction with pay may not be a good measure of pay

differentials, especially given the tendency for most people to desire higher rates of pay. The HILDA

Survey provides other data in support of this latter hypothesis. Specifically, survey respondents were

asked whether they thought the pay they received was fair or not. Compared with other groups of

professionals, only nurses were more negative about the fairness of their pay. Thus even though

teachers do not appear to be any more dissatisfied with their pay, many teachers clearly see their rates

of pay as insufficient given the type of work they do and the skills required.

In sum, the relative pay of Australian teachers compared with peer professional workers, depends on

the assumption made about actual annual leave taken. If we assume that teachers take 12 weeks per

year then teachers have higher rates of remuneration compared with other professional groups even

after controlling for age and experience. However if they are assumed to only take 4 weeks per year

then they are one of the least paid groups. Teachers’ feelings about their overall job satisfaction is

higher than other professional workers.


Table 8: Job satisfaction by occupation: Percentage reporting high satisfaction (8, 9 or 10)

Satisfaction with: Occupation

Pay Job

security Work itself

Hours worked

Flexibility to balance work & non-work

Overall job

School teachers 45.2 76.7 65.2 51.8 47.2 65.0

Other educational profs 42.9 64.9 74.8 55.1 63.3 66.2

Nursing professionals 30.8 84.1 53.3 46.9 49.7 50.8

Other health profs 56.0 82.4 68.8 61.6 50.0 62.4

Science, bldg etc profs 37.7 58.3 63.4 45.7 66.9 59.4

Business, info profs 44.7 58.7 58.5 50.6 62.3 56.9

Social profs 57.5 71.1 66.0 49.1 65.4 65.4

Associate profs 42.9 69.2 63.1 48.8 56.2 60.4

Other occupations 41.9 64.1 59.7 52.4 60.2 60.7

Source: Households Income and Labour market Dynamics in Australia (HILDA), University of Melbourne, 2002.

Institutional limitations

Regardless of how attractive the teaching profession may be, institutional limitations on the number of

teacher training positions can cause teacher shortages. Over the last four years there has been an excess

in demand for places to undertake teacher training in Victoria, and to the extent this pattern is true for

the other States, there is a surfeit of people, over all, desiring to enter the teaching profession. As

shown in Table 9, a little more than half of all first round applicants through VTAC were able to enrol

for training in 2001 and this was greater for primary teaching than secondary. Within secondary level

training, it is not possible to assess the level of excess demand by subject area as not all institutions

have learning area sub-quotas, however informal information from the major training institutions

suggest that where sub-quotas exist, they are not filled in the major shortage areas of maths, science,

IT, economics, geography and visual arts.13

Table 9: First round applications and subsequent enrolments, Victorian teacher training courses, 1998 to 2001.

Course specification Number of Applicants* Number of first year enrolments

1998 1999 2000 2001 1998 1999 2000 2001

Post Graduate

Primary 762 937 1088 1498 436 518 545 648

Secondary 1318 1358 1465 1884 1066 1170 1216 1289


Primary 1807 2057 2412 3046 1668 1511 1563 1635

Secondary 736 834 855 1091 692 517 519 578

TOTAL 5398 6189 6759 8334 3862 3716 3843 4150

13 This information derived from La Trobe, Melbourne and Monash Universities.


Source: DEET and VTAC

There is some concern that high rates of teacher recruitment by the Government in the 1960s and 1970s

has lead to an age bulge in the distribution of Government teachers. According to Table 10, the

percentage of employed qualified government primary and secondary teachers who were aged between

45 and 60 during 2001 was 40.5 and 42.2 per cent respectively. This is higher than the non-government

sector (31.4 and 33.3 per cent) and but lower than the approximate third of qualified teachers who are

working outside teaching (48.6 per cent). The latter is consistent with the hypothesis that on average

qualified and experienced teachers who leave for non-teaching jobs, do not return.

Committee 2003 have documented a strong positive trend rise in the median age of teachers since the

late 1970s. The labour force implications of this creeping mean age are compounded by specific

government superannuation schemes that make it especially attractive to retire at age 55. Over the

coming decade the rate of net increase in the supply of qualified teachers will have to rise (through

higher training rates, net immigration and net inflow from other occupations) unless there are declines

in demand from student numbers.14

The extent to which high retirement rates are a concern to policy makers, depends on whether the time

taken for teacher training institutions to adjust the supply of new teachers falls within the planning

horizons of the various teacher forecasting models. If forecasting models are reasonably accurate for

horizons of two to three years, and teacher training institutions can increase training places within two

to three years, then long term planning for the impending high teacher retirement rates need not occur.

In summary, the short lapsed time required to train a graduate as a qualified teacher means that

provided there are excess demand for training positions, the system can be very responsive to short

term changes in the labour market balance. This is not the case for the labour market segments in

chronic shortage where the shortfall of teachers appears to be source to the lack of interest by science

and LOTE graduates to train as teachers.

14 Committee for the Review of Teaching and Teacher Education (2003) argue that student numbers are unlikely to increase for the next decade.


Table 10: Percentage of qualified(a) and employed teachers aged 45 to 60 years in 2001 by sector and occupation, Australia

Primary School


Secondary School Teachers


occupations (b)


State/Territory Government 40.5 42.2 58.5 43.2

Non-government sector 31.4 33.3 46.8 34.2

All sectors (c) 37.9 39.2 48.6 38.1

Notes: (a)

Refers to highest qualification. Only about 75% of people with an education qualification (as one of their 3 top qualifications) state education as this highest qualification. This is related to age. 93% of 20-24 year olds who have an education qualification claim it is their highest qualification, compared with 66% of 50-55 year olds (ABS 1997 Survey of Education and Training, unpublished data). (b)

Whether a person with an educational qualification in their highest 3 qualifications cites it as their highest qualification does not appear to vary by whether they were employed in the education sector or not. While 77% of education sector workers qualified in education cited this as their highest qualification, the rate for those not working and employed in other industries was 74% and 75% respectively (ABS 1997 Survey of Education and Training, unpublished data). (c)

Includes other government sectors and not stated. Source: ABS 2001 Census of Population and Housing, unpublished data.

5. Enhancing attraction and retention

If we assume that teacher quality is one of the major determinants of student achievement 15 then

policies to increase the attraction and retention of the scarce and more able teachers will have a

significant effect on student outcomes. To be cost effective, it is desirable that any policies are focussed

on the target teacher sub-group rather than spread uniformly across the whole teaching population.

With respect to the first concern over the chronic shortage of teachers in specific discipline areas, our

previous discussion suggests that there are few institutional barriers to the training of these teachers and

we limit our discussion to inducements to attract more people to the target labour force.16

15 We do not address the issue of what determines teacher quality as it is not strictly relevant to the argument of this paper. The applied research on this topic is small and largely foreign and the findings are fairly divergent. Some of the differences in results are likely to be due to the measures of student performance, the scope of control variables and the

level of schooling. Many of the US studies only examine primary school pupils and we would not expect their results to generalize for all levels of education. Wayne and Youngs (2003) conducted a review of all US studies on the relationship between teacher characteristics and student outcomes and limited their scope to only those studies which met fairly restrictive criteria regarding the inclusion of proper control variables. This limited their filed to 21 studies. They concluded that student achievement was greater for teachers trained at more prestigious colleges and for teachers who had themselves achieved better professional test scores during their training.15 The presence of teacher training and the relevance of specific degrees to discipline taught was only important for mathematics. They found less clear evidence for the role of experience and ethnicity. Studies on the effects of in-service teacher training are also disappointing. Jacob and Lefgren (2002), find no significant effect of teacher training on the mathematics and reading performance for primary school pupils in the US, and they report that out of 93 other US studies, only 12 show positive effects. 16

Teacher pay and tenure conditions are not the only factors governing the reward to teaching and thus the supply of labour to each school. A study by Ballou and Podgursky (1998) found that despite the lower wages for private school teachers in the US, private school principals were as satisfied with either quality of their teaching staff and were more successful in retaining the best teachers. They believe that this was because the private system offered better teaching resources and supervision, and because principals had more flexibility to vary pay structures and dismiss teachers for poor performance.


The second concern, to reduce the attrition of more able teachers, is only meaningful if there is a

considerable disparity in teacher performance, and is only operational, if school administrators are able

to correctly assess individual teacher performance. In abstract, the latter can be calculated as the

addition to the knowledge and skills, broadly defined, of students as a consequence of their schooling.

It is a value added concept. While simple to conceive at the very broad level, it is notoriously difficult

to measure for the assessor has both to determine the knowledge base prior to starting school and to

abstract from other influences on students’ knowledge during the school year.

This section looks first at barriers to the use of earnings differentials to attract and retain more maths

and science teachers and secondly, at the difficulties associated with the identification of high

performing teachers.

Teacher wage institutions

With the exception of periods of national prices and incomes agreements, there are no legal or quasi-legal forces that prevent a principal from offering differential rates of remuneration to differential types

of teachers. The lack of pecuniary incentives for teaching skills in chronic shortage disciplines appears

attributable to accepted norms within schools and are closely aligned to award or agreed wages. The

major criteria for higher pay in the government sector are years of experience, service with current

employer and additional responsibilities. Few government teachers are paid over-award or incentive

payments and biennial surveys of government schools have revealed that, even for schools claiming a

teacher shortage, principals gave incentive payments to only 2 to 5 per cent of teachers (DEET


Similar to the government sector, pay in the Catholic sector is determined on the basis of experience

and qualifications, not subject matter. Principals can make extra payments to retain desirable staff,

however, not only is this on an ad hoc basis, but anecdotally it has been reported that it would be

difficult to sustain within the existing budgetary structure.

Independent schools have greater freedom than the government and Catholic sectors to set wages for

their employees. Some schools pay less than the government schools and some more, depending

broadly on the fee levels. Pay is either determined by certified collective bargains or informal


individual contracts. While experience is a common determinant of a teacher’s wage within a school,

some schools do offer higher rates for teachers with scarce skills such as teaching subjects.

In both the government and Catholic jurisdictions, there are no provisions to recognise that the different

teaching areas are governed by different and unequal market forces. In the independent system, there is

greater scope for pay variation; however there is little data on the extent to which schools use this to

attract and retain scarce skills.

While the aggregate data is consistent with the view that teacher remuneration overall is comparable

with other destination occupations for graduates,17 it does not rule out earnings above or below market

rates for the different market segments. Historically the unions have opposed allowing variation in the

pay of teachers in different secondary subjects to be enshrined in awards of Certified Agreements, on

the basis the teacher should be paid the same rate for the same work. However, teaching in one market

segment is not the same as teaching in another. They require different skills and acquired sets of

knowledge. The fact that different teachers cannot be substituted for one another is objective evidence

that they are not doing the same work. The fact that some teaching segments are in greater relative

demand (or shortage) is indicative that the work is not of the same value. The grounds for maintaining

that pay should not vary by subject or year level, appear to be heavily based on accepted habit and

customs rather than incentive structures that would make the teaching labour market efficient.

A major difference in the conditions of employment relates to tenure status. Teachers can be appointed

as on-going (tenured), fixed term contract or on a casual/relief basis. It is very difficult to retrench or

fire a tenured staff member in the government system. In Victoria since 1999, there have been several

restrictions on the ability of schools to hire fixed contract and casual relief staff. Fixed term contracts

can only be offered if they are replacing a tenured staff member on leave, and casual/relief staff can

only be used to replace short term staff deficient due to sick or professional development leave.

The situation is similar for the Catholic system except that principals may also hire on a fixed contract

if it is for a designated short term subject or if declining student numbers mean that they will not need

17 Teacher salaries starting salaries see GDS for uni melb and committee argue that Aust teacher starting salaries are high but OECD standards pp76.


this teacher the following year. Conditions in the Independent school sector are comparable. Fixed

contract staff are not generally paid a wage premium.

These institutional limitations impose several rigidities and inefficiencies on schools by limiting their

ability to hire short term staff, where they are most appropriate, that is, in subject areas where they are

unsure of future demand for a subject or where they are unsure of the suitability of a staff member. This

means that schools will be hampered in their response to student subject choice and their ability to

select the best teacher. In addition, the lack of pecuniary reward to compensate fixed contract teachers

for not having tenure, directly causes the average quality of teacher available for fixed term contracts to

be lower than the tenured level. There is no a priori reason why wages in this part of the market for

teaching services should be discounted. There is no reason why teachers, who may prefer limited

contracts, should be offered a lower total employment package than other teachers. These institutional

or conventional restrictions which limit employers’ ability to pay based on the type and quality of

teaching services comes at the expense of students, other things considered.

Identifying high performing teachers

While is difficult to statistically identify the characteristics that make some teacher more effective than

other, Hanushek (1986) has argued that the findings are unequivocal that ‘Teachers …differ

dramatically in their effectiveness’. If there is a considerable dispersion of the teacher productivity,

then the value to students of increasing the retention of the top 5 per cent (for example) of teachers is

also considerable. To achieve this however, depends on first, the difference in performance between

them and the remaining 95 per cent and secondly, the ability of school managers and supervisors to

correctly identify the high performers.

Identifying high performing teachers is a more complex issue and there is a considerable body of

overseas, but not Australian, literature in this area. Academic tests of pupils’ achievements can be used

to assess teacher and school performance and since 2001 this became a national standard for primary

schools in the US18 and, from 2000, in the UK.19 A major concern for this practice is how to assess

18 No Child Left Behind Act 2001. Prior to this, there had been a number of performance based teacher or school incentive schemes in the US. During the 1980s these were individual teacher based but they fell from favour and by 1990 were largely absent (see Burgess et al. 2001). The recent resurgence has been in school based schemes, but there can be trickle

down effects on individual teachers pay within the school.


‘value-added’. Student performance cannot simply be compared between classes or teachers as

differences in scores can be attribute to non-teacher characteristics such as the students’ social and

socioeconomic background and ability. Therefore, value added studies of schools take into account the

students’ backgrounds or more often ability or prior performance.20 Even using this more sophisticated

understanding of “value added” there are problems since the school, and other external factors such as

tutoring, also contributes to prior performance. Furthermore there are other considerations such as the

costs of testing all students, the tendency for teachers to teach the test, the incentive to schools for

students to perform poorly on the initial test and the sensitivity of the test to small random occurrences.

Two or three very high or very low performing students can substantially influence summary measures

of value added. This is not to say assessing teacher performance using ‘objective’ testing methods is

impossible but in combination with other forms of assessment should be carefully considered. Teachers

whose students consistently perform well above expectations can be identified.

These problems have been highlighted by a series of studies in the US where ad hoc programs to affect

the performance of incumbent teachers through pecuniary incentives - individual and school based -

have existed since the mid-1990s. These ‘high-stakes tests’ involve rewarding or sanctioning schools

and teachers according to student performance in reading and mathematics tests (either according to

average levels or changes in levels). While it was often found that scores on the designated test

increased following the adoption of these policies, there are limited effects on broader based State-wide

exams and learning areas not covered by the test (Jacob 2002, Ladd 1999, Klein et al. 2000).21 There is

evidence that teachers respond to these high-powered incentives by increasing the rate at which poorer

students are placed in special programs which exempt them from the test (Jacob 2002, Deere and

Strayer 2001), are held down (Jacob 2002), and the rate of test cheating by schools (Jacob and Levitt

2002). Furthermore, there is selective evidence that these incentives have caused teachers to overly

19 See Burgess et al. (2001). 20 Two major methods are employed to estimate the relative determinants of student outcomes (See Burgess et al. 2001 for a

summary of these). The first method uses regression analysis to isolate the separate effects of student, school and teacher characteristics on student outcomes - usually test scores or school completion rates. The second method estimates education production functions in order to benchmark individual schools against best practice. Studies in this area are not immune from problems which limit their interpretation. In addition to the issue of poorly measured or missing data, a problem common to many areas of econometric analysis, many of these studies are not able to clearly identity direction of causation and distinguish causation from correlation. 21

However, Stecher (2002) reviews case studies and argues that the results are mixed and the net effects uncertain.


teach the test at the expense of low-stake subjects like science and social studies (Jacob 2002, Deere

and Strayer 2001, Klein et al. 2000).


There appear to be no analytical studies of the teacher labour supply in Australia: studies that disclose

who and what type to teachers are being attracted to teaching or are leaving the teaching profession and

the major factors determining this choice. This is a major oversight given the importance numerically

and performance over time. Nonetheless, from what we know from existing domestic data and overseas

studies, it is hard to argue against the assertion that there is and has been continual shortages in teachers

for secondary mathematics and science in Australia and overseas. Our best information suggests that

this is because fewer science and mathematics graduates, compared to humanities and social science

students, are attracted to the tasks involved in teaching children. Attraction is a matter of degree

however, and higher earnings can be used in order to attract more maths and science graduates at the

margin. Higher earnings are required throughout their career paths in order to retain as well as attract

desirable teachers. The scope of the problem appear so profound and endemic, that tinkering around at

the edges with one-off attraction incentive schemes such as bursaries and extra advertising is unlikely

to have sustained effects. Earnings premiums can also be used to attract teachers to schools which have

chronic retention problems such as disadvantaged schools and those in remote locations. To ensure that

these incentives are signalled to maths and science graduates, these higher salaries and extended career

paths should be formalised in wage agreements (and as such would apply to incumbent as well as

prospective teachers).

Bonuses and performance loadings also have a role to play in keeping the most able and apt instructors

in the classroom. The success of such as scheme depends on being able to identify the best teachers and

while we are not able to give a definitive answer to this complex and difficult question, we offer two

thoughts. First, increasingly, many workplaces are introduction performance loadings and these are

usually based on the recommendation of supervisors. There is no reason to suppose that the teacher

labour markets are any different from other labour markets. Secondly, while performance loadings will

never be perfect, their introduction is warranted if they make the delivery of educational services to

young Australians better than what they would have been without these loadings.


Finally, for these changes to be effective, two enabling factors are required. First, school budgets

should be increased to allow salary premiums to be paid and secondly, teachers within schools should

recognise and accept that in the interests of better educational services for young people, wage

differentials need to change.



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