DO NOT REFERENCE OR CIRCULATE WITHOUT PERMISSION Salary Incentives and Teacher Quality: The Effect of a District-Level Salary Increase on Teacher Retention

5 In a political environment in which student achievement gains are increasingly demanded, policymakers focus more than ever on teacher turnover and its potential negative effects on student learning. Nationwide, approximately 17% of teachers leave their schools every year (Planty, 2008), and the attrition rate is even higher in urban districts and schools that serve large populations of low-performing, non-white, and low-income students nationwide are beginning to experiment with policies that leverage teacher compensation in an effort to retain teachers. Such policies often include increasing teacher salaries and introducing targeted incentives to recruit and retain particular teachers. This strategy is growing in popularity Existing research suggests that teacher turnover may have disruptive effects in schools, regardless of the kinds of teachers who leave the profession (Guin, 2004; Ronfeldt, Lankford, Loeb, & Wyckoff, 2011). For this reason, may be important to reduce turnover of teachers across the profession. Furthermore, in light of evidence that highly-effective teachers have a strong and Sanders & Rivers, 1996), it is also important to consider how retention efforts differentially influence the behavior of the most effective teachers. While there is evidence to suggest that teacher retention in general is improved by increases in compensation 2006), there is not yet sufficient evidence on whether salary increases can improve retention in urban school districts and in schools serving high proportions of minority and low-income 6 students. Moreover, there is inconclusive evidence on whether such salary incentives can be effective in retaining the most highly-effective teachers. To address this gap, this study assesses the effect of a salary increase on teacher retention in the San Francisco Unified School District (SFUSD). Specifically, I examine the effect of the Quality Teacher and Education Act of 2008 (QTEA), which introduced an overall salary increase ($500-6,300, varying by placement on the salary schedule), a $2,000 bonus for teaching in a hard-to-staff (HTS) school, and retention bonuses ($2,500 after the 4 th year and $3,000 after the 8 th year). These aspects of QTEA were intended to improve teacher retention both district-wide and within particular schools that have historically had problems with teacher turnover. QTEA implementation corresponded with a downturn in the economy that could impact teacher retention even in the absence of the policy. Thus, to estimate the causal effect of QTEA compensation elements on teacher retention, I compare teachers who are arguably similar in the way that they would be affected by …