When Average Salary Is Not Average: How Teachers Total Compensation Dwarfs Other White Collar Workers

By Bill Zettler


We often hear in the media and from the teachers unions how teachers are overworked and underpaid. The number commonly thrown about is $43,000 per year for average teacher salary nationwide. Here in Illinois it is about $60,000/yr according to state actuaries.


What is not discussed is “Total Compensation” which is the total value of a given job based upon not only salary but including indirect compensation such as pensions and time off which if provided directly would involve increased salary to the employee. “Total Compensation” then is the total value of the job to the employee and the total cost to the employer. The teachers' employers are the taxpayers of Illinois.


Teachers On-Average Are Younger than Other White Collar Workers


In the comparison of teachers vs. other white collar workers there is another calculation that must be taken into account. The “average” teacher is 2.5 years younger than the “average” white collar worker because “average” teachers retire 5 years earlier than “average” white collar workers – age 58 vs. age 63. It follows then that comparing say an “average” 40 year old teacher to an “average” 42.5 year old engineer we must adjust the teacher's salary up because a 42.5 year old engineer will make more than a 40 year old engineer and likewise for a teacher.


According to state actuaries teachers average 7% increases per year over their 35 year career. Therefore the teacher's salary would need to be adjusted upward by 17.5% (2.5 X 7%) for an apples-to-apples comparison.


Teacher's Jobs Are Protected By Tenure


The other unusual benefit accruing to teachers that is nowhere to be found in the private sector is the concept of “tenure”. Under “tenure”, teachers cannot be fired or laid off after 4 full years of employment except in extraordinary circumstances. This means for the average teacher the last 30 years or so of employment is guaranteed by contract. And, in the vast majority of school districts, that means 30 years of salary increase.


Compare this with Motorola which has cut 84,000 employees since 2000 including thousands of white collar engineers and executives. Although the value of tenure is difficult to calculate it certainly has a value greater than zero otherwise why won't teachers give it up? I think if you asked a Motorola employee how much he would be willing to pay to guarantee his employment for the next 30 years (with a raise each and every year) he would say at least 10% of salary so that is the number we will use although a reasonable person could argue for a higher or lower amount.


Teachers Work Fewer Days Per Year


Teachers have come up with a myriad of reasons why they should only work 182 days per year but none of them makes any sense. The need to take classes in the summer doesn't hold water because other college graduates in the private sector take classes too but they do so evenings and weekends. So this calculation is easy: 182 days for teachers compared to 240 days for private sector workers means the teachers daily/hourly rate of pay is 31% greater than private sector workers with the same salary.


For teachers who argue they would prefer to work 12 months rather than 9 my question is would you do it for free or would you demand another 31% in salary to compensate for the 31% increase in work days? And contrarily, how many white collar workers would agree to a 23% pay cut in order to be off from June to September? My guess is quite a few would take the cut in order to be home with the kids or take extended vacations or take a full quarter of college classes. It would be even more likely knowing they had tenure and could not be fired for decreasing their number of work days per year.


Teachers Retirement Plans Much More Lucrative


Last but certainly not least are retirement contributions by employers for the benefit of their employees. This is an easy calculation because numbers are available. In the case of teachers the actuaries of the TRS (Teachers Retirement System) provide this number at the end of each year.


As of 2007 they say that for each of the next 38 years the teachers' employers i.e. the taxpayers of Illinois must pay an amount into the pension system equal to 25.22% of each teacher's salary. That compares with a typical private sector employer paying about 11% (6.2% Social Security and 5% 401K contribution). So let's say 14% difference although it could be higher than that if the TRS Pension Fund does not average 8.5% return each year for the next 38 years.


For example if the investment return averages 6.5% the taxpayer pension contribution will be more then 36% of the teacher's salary. The difference between public (11%) and private (25%) employer's contributions explains why teachers contributing 9% to their retirement have much more valuable retirements than private employees contributing 11% to their retirement.


Teacher Compensation At least 40% Higher Than Degreed Engineer


Here then is a summary of total compensation Public School teacher vs. Mechanical Engineer. I chose an engineer for comparison because most people would agree that a 5 year engineering degree is at least the equivalent of a Master's Degree in Education in terms of difficulty. Engineer salary data from BLS (Bureau of Labor Statistics, Chicago metro area, 2006).


                                                                                        Teacher           Engineer

Average Salary per TRS Actuaries and BLS                         $60,000           $ 71,000

Average Teacher 2.5 years younger @ 7%/yr = 17.5%          $10,500           $       00

Tenure 10% of salary                                                         $  6,000           $       00

Teacher contract 182 work days/yr versus 240 = 31%           $18,600           $       00

Employer retirement contribution 25% vs. 11%                     $15,000           $  7,800


Thus on a 12 month work basis the average teacher in Illinois receives compensation equal to $110,100/yr versus $78,800/yr for the average Mechanical Engineer with the same experience or 40% more.


Another way to look at it is calculating a day rate of compensation since teachers work 182 days and others work about 240. On that basis teacher's daily compensation is $502 per day ($95,200/182) versus the Mechanical Engineers $328 per day ($78,800/240). On that basis the average Illinois teacher's daily total compensation is 53% higher than the average Mechanical Engineer.


If you take the average teacher salary of $89,000 at District 211 in Palatine and do the calculations above you come out with an average compensation for all 900 teachers of a whopping $163,000/yr or $895/day. That would dwarf the average MD's (Family Practitioner) total compensation of about $150,000/yr or $625/day not counting the MD's weekends, nights and holiday work.


Teachers Have Non-monetary Quality of Life Advantages


Although we have mostly discussed monetary issues there are also quality of life issues associated with every job. In the case of teachers there is certainly a large benefit to having 15 weeks a year off (182 days = 36.4 weeks). Also knowing every year you will have 2 weeks at Christmas and other holidays off as well as being home with your children when they are off in the summer would certainly be a plus.


Another advantage for most though not all teachers is commute time. Since schools are located where the students are most teachers live near-by and therefore have a much shorter commute than the average Chicago commute time of 35 minutes each way. In fact in most suburban towns the school district is the largest employer and in 67 of the 102 counties they are the largest employer. Thus the work is near the workers thus decreasing total work time per day (commute time plus job time).


Thirdly teachers have a total lack of overnight travel. Many white collar workers in the public sector spend large amounts of time traveling, leaving early (previous day usually) and arriving home late. Traveling for business is stressful and hard on the family, and not having to do that is another advantage of being a teacher.


Finally there is an economic factor known as “Coefficient of Relative Risk Aversion” (CRRA) which is often used in investment decisions. For example a person who invests in a government guaranteed CD would have a high CRRA while someone else who invests in a diamond mine in Kazakhstan would have a low CRRA. The same calculation can be made with career choices.


Economists have found that people who take public sector jobs tend to choose them because they have less risk i.e. they are more stable and being fired or laid-off is less likely. With teachers and tenure there is virtually no chance of being laid-off. Therefore people with higher levels of risk aversion e.g. teachers will accept jobs with less pay in exchange for the lower job risk. Contrarily private sector employees (think real estate agents) tend towards more risk in order for the possibility of more reward.


Teacher Mythology Perpetrated by Unions, Politicians and the Media

Let's review some of the more egregious myths:


1. Teachers are underpaid relative to their peers.


… This article and others like it in the Championnews.net archives should easily dispel that myth.


2. If teachers have it so good why is there a shortage of teachers?


… There is no shortage of teachers there is a SURPLUS. According to a recent ISBE (Illinois State Board of Education) report Illinois public schools have a 92.5% retention rate. So that means about 12,000 vacancies are created each year INCLUDING 6,000 retirees. Offsetting this is 5,000 returnees (people who used to teach but left and now want to come back) and 25,000 new teaching certificates each year. In other words for 12,000 jobs, we have 30,000 available to fill those jobs each year. That's year after year meaning since 2003 Illinois has generated about 75,000 more certified teachers than there were jobs. That means 75,000 trained teachers are not teaching because there are no teaching jobs available.


3. If teaching is such a good job why do so many leave?


… As the above 92.5% retention rate shows they are not leaving. Teachers are smart enough to know when they have a good thing going. And the US Dept. of Education has written that contrary to what you read in the media, teacher turnover is lower than other professions, not higher.


4. We are going to need more teachers therefore we will have to pay them more.


… As number 2 above shows we have 10's of thousands more teachers than we can possibly use.

… The ISBE predicts fewer students going forward starting in 2008-2009 school year. Therefore we should need fewer teachers not more.


Teacher Compensation Summary


No matter how you calculate the “Total Compensation”, Illinois teachers are, on average, among the highest, if not the highest, compensated workers in the state. The unending PR campaign by the teachers union has even convinced the teachers they are under-compensated though obviously they are not. Is their job easy? No it's not but neither are other people's jobs.


Certainly even teachers would agree that policeman, firemen and oncology nurses have even more stressful jobs than they have and at much less compensation and much worse work schedules including nights, weekends and holidays. And if you really want stress try being an unemployed Motorola engineer looking for a job at exactly the same time 100's of other laid-off people with the same skills are looking for one also.


Here is a story of Bea Dewing a 56 year-old with two degrees including one in Computer Science who was laid-off from her high-tech job at Sprint. It is somewhat ironic that her age 56 is when most suburban teachers retire with a pension higher than this woman's salary. Notice how grateful she is to have a job.


As we can see above the concept of fair teacher compensation is turned on its head in the Illinois public school system. School employees have less job risk AND higher compensation, the best of both worlds. Only politicians could force this illogical economic result onto the taxpayers. And they force it on taxpayers because of the undue influence of teacher union contributions. Only when the connection between politicians and teacher union donations is broken will the teaching profession enter the same economic world the rest of us live and work in.


Click here to see the Top 100 teacher Salary and Compensation for 2007. Note all 100 exceed $1,000/day total compensation.



Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address. Click here to read more by Mr. Zettler.