The Effects of Pay Decentralisation on Teachers’ Pay and Teacher Retention

In 2013/14 the arrangements for setting teacher pay in England were radically reformed.  A system of seniority-based progression was replaced by a decentralised system allowing local authority schools to pay teachers based on individual performance and local labour market conditions. Using a data-driven strategy we show that, on average, teachers’ pay in local authority schools fell relative to the counterfactual pay they would have received in the absence of the reform.  Over half of all schools let their pay drift downward relative to the counterfactual.  Effects were larger in secondary schools (2% fall) than in primary schools (1% fall).  Local authorities played a role in the degree to which schools adopted flexibility.  Among secondary schools, proximity to Academy schools was important.  Schools that allowed their pay to drop the most experienced a decline in teacher retention rates and a reduction in the percentage of qualified teachers at the school.