How much can pay improve recruitment and retention?

The Department for Education (DfE) is currently considering what proposals to make to the independent teacher pay review body for September 2023. DfE will have one eye on negotiating with unions in the face of strike action, while also considering the Treasury’s willingness to support a pay offer with the necessary cash.

Another key focus will be the potential impact the pay award could have on teacher recruitment and retention. Teacher supply is in a difficult state, with last year’s recruitment for primary training courses and 13 out of 17 secondary subjects failing to reach their respective targets. This year’s recruitment numbers are so far only a little better.

The research evidence is important for understanding what impact different pay awards might have on teacher recruitment and retention, and for understanding the effectiveness of other policy tools at the government’s disposal to address teacher supply issues.

DfE‘s evidence review on the impact of pay increases on teacher retention concludes that there is good evidence higher teacher pay is associated with higher retention. However, the economic research that this finding is based on is clear that it is not the absolute pay increase that matters but how that pay increase compares to what economists call the ‘outside option’. In other words, if pay for a job a teacher might take up if they left is rising at the same rate as their pay as a teacher, then it is likely to have little bearing over their decision about whether to leave or stay.

Teachers’ decisions in this regard are complex and multi-faceted, and certainly not only about pay. Indeed, NFER research has consistently shown that teachers who leave teaching tend to earn less in their new job than they would have done had they remained. What they do tend to get in return is greater job satisfaction and more flexibility.

But after weighing up how all the factors associated with a teaching job – such as workload, flexibility, working environment, sense of purpose and length of holidays – compare to another job, pay becoming relatively less attractive would likely tip some teachers into leaving who otherwise might have stayed.

To take an example from 2022, if the pay for experienced teachers rises by five per cent, but average earnings in the rest of the labour market rise by six per cent, then the evidence suggests that pay may not contribute to improving retention at all.

NFER’s recent research also finds that teacher pay rising more quickly than outside earnings is associated with increased recruitment to ITT. This further reinforces the considerable impact of pay as a factor affecting recruitment and retention, and the crucial importance of judging their likely effects by considering relative pay increases in the context of the wider labour market.

The Office for Budget Responsibility forecasts that average earnings will rise by 4.2 per cent in 2023. Therefore, any teacher pay increase is only likely to have a positive impact on recruitment and retention if it is higher than the increase in what teachers might be able to earn outside of teaching. This is therefore a useful benchmark for judging whether the pay award is likely to contribute to improving teacher supply.

Pay is a powerful financial lever at the government’s disposal to affect recruitment and retention, but is not the only such lever. It is also a fairly blunt instrument, as it is not differentiated by phase or subject, while teacher supply challenges differ considerably in this respect. The government has recently made noises about considering differential pay awards, but for now training bursaries and early-career payments are the only targetable financial incentives.

The evidence regarding  these levers is growing too. A range of research has found that bursaries have a significant impact on recruitment into ITT, but high-quality evidence on whether those additional trainees stay on in teaching is lacking. Recent UCL research also suggests that early career payments are effective for retaining teachers.

All of which means the government faces difficult choices in the weeks ahead, but also that it has a variety of options to solve both the immediate challenge of strikes and the sector’s long-term challenges.