With teachers, the law of supply and demand isn’t working

March 11, 2024

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The United States long has struggled with a teacher shortage, a problem that worsened during and after the pandemic.

Today, classroom professionals are in high demand and short supply. It’s a classic economic imbalance that should lead to higher prices – in this case, higher wages. Instead, teacher pay has lagged that of other U.S. workers.

Something isn’t right, and the ramifications are clear. Stagnant wages and a stressful work environment are pushing classroom experts to the exits and discouraging young people from joining the profession.

Supply is lagging demand

Using employment and wage data for public and private kindergarten through 12th-grade teachers, the ADP Research Institute built indexes to track employment trends. We found that openings for educators have increased dramatically since 2021 while employment levels remained relatively flat. Teacher employment even fell in the months following the pandemic outbreak as communities lost educators to retirement and resignations.

While demand for teachers fluctuates significantly according to the time of year, supply doesn’t show the same seasonal pattern, a dynamic that could further exacerbate teacher shortages.

Teachers are losing ground on pay

As of October 2023, teachers were earning an average of $68,000 a year, 8 percent less than the average for all U.S. workers, a pay gap that’s been widening—it was only 3 percent in January 2018.

And this comparison between teachers and the broader U.S. workforce doesn’t consider differences such as education level, which is higher among teachers, making the shrinking pay premium even more unsettling.

Plotting the ratio of teacher salary to the salary of all U.S. workers—what we call the Competitive Salary Index—clearly shows that teacher salaries are becoming less competitive and are growing more slowly than average wages for all employees.

Stagnating wages have led to recruitment woes as would-be educators opt for jobs in higher-paying industries even as tenured educators quit the classroom in greater numbers.

In the five-year period spanning 2018 to 2023, salary competitiveness eroded particularly for younger teachers, those aged 20 to 30. This is a worrisome development, one that has the potential to create or exacerbate labor shortages by discouraging potential teachers from joining the profession. The Competitive Salary Index has remained steady for all other age groups, indicating that teacher pay for these groups has held its competitive advantage.

When we applied the Competitive Salary Index to certain large combined statistical areas, the Orlando-Deltona-Daytona Beach area showed the biggest decline, with the teacher wage premium falling from 28 percent to 4 percent over the last five years.

The Washington-Baltimore-Arlington region had the largest pay premium gain. Teachers there earned only 89 percent of a typical U.S. worker in 2018, but their pay jumped to 106 percent of the average in 2023.

Our takeaway

The takeaway for employers is that recent wage increases in the overall labor market have made it harder to recruit and retain teachers since the pandemic. Non-monetary amenities such as professional training, flexible work arrangements, and job sharing could help employers stay competitive.