Great Teaching: Measuring Its Effects on Students' Future Earnings

In February 2012, the New York Times took the unusual step of publishing performance ratings for nearly 18,000 New York City teachers based on their students' test-score gains, commonly called value-added (VA) measures. This action, which followed a similar release of ratings in Los Angeles last year, drew new attention to the growing use of VA analysis as a tool for teacher evaluation. After decades of relying on often-perfunctory classroom observations to assess teacher performance, districts from Washington, D.C., to Los Angeles now evaluate many of their teachers based in part on VA measures and, in some cases, use these measures as a basis for differences in compensation. Newspapers that publish value added measures no doubt relish the attention they generate, but the bigger question in our view is whether VA should play any role in the evaluation of teachers. Advocates argue that the use of VA measures in decisions regarding teacher selection, retraining, and dismissal will boost student achievement, while critics contend that the measures are a poor indicator of teacher quality and should play little if any role in high-stakes decisions. The Obama administration has thrown its weight squarely behind the advocates, launching a series of programs that encourage states to develop evaluation systems based substantially on VA measures. The debate over the merits of using value added to evaluate teachers stems primarily from two questions. First, do VA measures work? In other words, do they accurately capture the effects teachers have on their students' test scores? One concern is that VA measures will incorrectly reward or penalize teachers for the mix of students they get if students are assigned to teachers based on characteristics that VA analysis typically ignores. Second, do VA measures matter in the long run? For example, do teachers who raise test scores also improve their students' outcomes in adulthood or are they simply better at teaching to the test? Recent research has shown that high-quality early-childhood education has large impacts on outcomes such as college completion and adult earnings, but no study has identified the long-term impacts of teacher quality as measured by value added. We address these two questions by analyzing school-district data from grades 3-8 for 2.5 million children, linked to information on their outcomes as young adults and the characteristics of their parents. We find that teacher VA measures both work and matter. First, we find that VA measures accurately predict teachers' impacts on test scores once we control for the student characteristics that are typically accounted for when creating VA measures. Second, we find that students assigned to high-VA teachers are more likely to attend college, attend higher-quality colleges, earn more, live in higher socioeconomic status (SES) neighborhoods, and save more for retirement. They are also less likely to have children during their teenage years, Teachers in all grades from 4 to 8 have large impacts on their students' adult lives. On average, a 1-standard-deviation improvement in teacher value added (equivalent to having a teacher in the 84th percentile rather than one at the median) in a single grade raises a student's earnings at age 28 by about 1 percent. Replacing a teacher whose value added is in the bottom 5 percent with an average teacher would increase students' total lifetime incomes by more than $1.4 million for a typical classroom (equivalent to $250,000 in present value). In short, good teachers create substantial economic value, and VA measures are useful in identifying them. Our findings address the three main critiques of VA measures raised in a recent Phi Delta Kappan article by Stanford education professor Linda Darling-Hammond and her colleagues. We show directly using quasi-experimental tests that standard VA measures are not biased by the students assigned to each teacher. …