The amount of government money being spent on primary school teachers has fallen by 11 per cent after the introduction of performance-related pay, according to new research.

Researchers say the main impact of “deregulating” teacher pay has been “negative and significant”, with reduced pay rises in both primary and secondary schools. 

lt found that there had been a significant drop in the proportion of money spent by primary schools on their teachers after the reforms were introduced in 2013.

The report says that the amount spent on primary school teachers fell by 11 per cent compared to the spending levels before the reforms.

Quick read: Performance pay ‘is ineffective’

Analysis: Teaching is more than ‘labour productivity’

Background: Teachers’ pay scales

The study has investigated how replacing teachers’ pay scales with a performance-related system changed the way staff are paid.

It reveals that average pay rises for teachers has been -1.7 to -1.8 percentage points lower in primary schools after the reforms, and -1.3 to -1.5 percentage points lower in secondary schools. 

The report, Deregulating teacher labour markets, also found evidence that teachers’ pay rises are linked to both the local economy and competition from other schools.

Researchers said they found that decline in teacher pay progression was smaller in areas with higher non-teacher wages.

The research by Ellen Greaves from the Institute of Fiscal Studies, Simon Burgess of the University of Bristol and Richard Murphy of the University of Texas is being presented at the Royal Economic Society’s annual conference at the University of Warwick this week. 

They conclude that the competition for teachers has been a key driver of the changes seen in teachers’ pay since the reforms.

It found that before teachers’ pay was deregulated, around 60 per cent of all classroom teachers received a pay award in line with pay-scale progression. 

However, after the reforms, the percentage of teachers that received this “expected” pay progression fell to below 40 per cent.

The report highlights that spending on primary school teachers has fallen by an economically meaningful amount.

It says that spending on teachers, as a proportion of primary schools’ spending overall, has fallen by six or seven percentage points whereas secondary schools are still spending the same proportion of funding on teachers.

The research says: “The result implies that before the reforms, primary schools were forced to pay some teachers more than they would optimally choose. 

“The reforms allowed primary schools to re-optimise and spend proportionally more on other things. It must be remembered, however, that the reforms took place during a period of public-sector austerity.

“This finding may therefore be different in situations with larger or increasing school budgets.”

The study found evidence that schools compete with other sectors for workers. 

It said: “Schools in areas with high non-teacher wages decreased teachers’ pay progression by less than areas with low non-teacher wages.

“This supports the theory that teachers’ pay is more competitive where labour market opportunities are good, because teachers have a better ‘outside option’ to the classroom. 

“The findings suggest that the negative effect of the reforms on teachers’ pay progression would be offset by around a £3-per-hour increase in local non-teacher wages.”

The study uses a census dataset tracking the pay of every teacher in England from 2010 to document the impact of the teachers’ pay reforms and local labour markets on pay progression.

A Department for Education spokesperson said: “Last summer saw the biggest teacher pay rise in almost 10 years, with classroom teachers being the big beneficiaries which included a 3.5 per cent uplift to the main pay range worth between £803 and £1,366 supported by a £508 million government grant across two years. In addition to an annual pay award, many teachers also receive increases from promotions and responsibility allowances.

“Whilst we know pay is an important issue for teachers, there are also other factors which can affect recruitment and retention, which is why this year we unveiled the first ever integrated recruitment and retention strategy in England. The strategy provides teachers with more early careers support and opportunities for flexible and part-time working, and builds on the work we have done to support school leaders to strip away unnecessary workload.”