Working Paper No. 04-13

Public School Teacher Salaries; Compensating Wage Differentials for Student Racial Characteristics
Stephanie M. Martin
October 2004


This paper examines the relationship between public school teacher salaries and the racial concentration and segregation of students in the school and district. A particularly rich set of teacher, school and district controls is used to isolate the effect of racial characteristics. Additional analysis uses only within-MSA variation in order to better identify the markets within which teachers are sorting. The results indicate that there is a compensating wage differential for working in schools and districts with a higher concentration of minority students. This is the first paper to consider whether or not racial segregation within school districts plays a role in determining teacher salaries. I find that more segregated districts tend to pay lower salaries. One interpretation of this result is that in highly segregated districts, families from predominantly white schools exert greater political power. Because the white schools do not need to pay a compensating wage differential to teachers, families from these schools act to keep salaries lower than more integrated districts. This suggests that predominantly minority schools in highly segregated districts might particularly suffer from a lack of resources to recruit qualified teachers.