The Role of Master's Degrees in Teacher Compensation

A new report released by the Center for American Progress argues that states across the nation spent nearly $15 billion a year in bad investments because of the so-called master's degree bump. Teachers with advanced degrees are generally compensated with additional salary or stipends, known as the master’s degree bump, but some states are paying far more into this inefficient and unwise policy than others. In New York, for instance, the state spends more than $460 per student each year on its master’s degree bump. In others states, such as Utah, that number is $39 per student each year, illustrating the tremendous range in values.

Most of the nation’s school districts remain shackled to what the report calls traditional, simplistic salary schedule in which just two measures matter: years on the job and the advanced degree. Although teachers with master’s degrees generally earn additional salary or stipends research suggests that they are no more effective, on average, than their counterparts without master’s degrees. The analysis, entitled "The Sheepskin Effect and Student Achievement," dissects the nation’s sizeable investment in master’s bumps as a means of highlighting policy obstacles to a more smartly differentiated compensated approach.

Using the most recent data available, the report’s authors Raegen Miller and Marguerite Roza found that in the 2007-08 school year, $14.8 billion was spent nationwide on this form of teacher compensation. A similar analysis released by CAP in 2009 found that during the 2003-2004 school year, nearly $8.6 billion was spent on so called master’s bumps. The findings of today’s report reveal that the nation’s annual outlay for this form of compensation has surged by 72 percent. This increase is plausibly related to steep increases in school budgets during the period and to the growth of online providers of master's degrees.

Key findings from the state-by-state analysis include:

• Spending on master's bumps exceeds $400 per pupil in Ohio, Minnesota, Rhode Island, New York, Vermont, and Illinois.
• The average master's bump exceeds $10,000 in Washington, D.C., Illinois, and Minnesota.
• The estimated percentage of teachers holding a master's degree ranges from 28 percent in Louisiana to 88 percent in New York.
Based on these findings, the report’s authors propose the following recommendations:
• State policymakers should dispose of policies that mandate differential pay for teachers with advanced degrees or that make advanced degrees a requirement for remaining in the profession.
• In districts where the master’s bump takes the form of an annual stipend sitting on top of a teacher’s salary, rather than increasing stipends in conjunction with cost of living increases, districts should avoid directing new resources towards them.
• In districts where the master’s bump has penetrated the salary schedule, districts should create different salary schedules for new teaching hires that are neutral with respect to master’s degrees while grandfathering the master’s bump of existing teachers.