Artwork Credit: “Restored Communities” by NJ Woods, a visual depiction of MTR’s vision

Returns on Investing in Teacher Preparation

A 2011 paper by several economists does some groundbreaking work showing the effects of highly-effective teachers on the future income of their students. This work shows that just a single year of learning with a highly-effective teacher pays long-lasting dividends. Specifically, it shows that a teacher whose value-added scores (student growth scores) are one standard deviation above average meaningfully increases the future income prospects for their students relative to what they would have earned being taught by an average teacher. This above-average teacher “invests” approximately $153,000 (present value) across their students each year that will pay out with interest in the future income of their students.1 In a class of 28 students, this would be a bit more than $5000 “invested” in the future incomes of each student. The paper found this by tracking students through to when they were filing income tax returns as an adult.

Both of the last two studies of MTR graduate effectiveness by Shelby County Schools showed average MTR graduate TVAAS2 value-added index about 0.5 standard deviations above other new hires at SCS. The model used in the paper suggests that improvement to future income scales linearly with teacher value-added measure (VAM), so MTR estimates that the average MTR graduate with 0.5 S.D. higher VAM invests an additional $76,000 per year ($153,000 × 0.5) in their students’ net future incomes compared to the value that would have been invested in them by the average SCS new hire. Furthermore, this is a present value of $76,000 of future student income.3 This investment will pay out over five times as much in nominal dollars in the future: $413,000. This is the return to Memphis students (additional future income) from a single year of the average MTR graduate teaching vs. the alternative of those students being taught by the average non-MTR new hire in Shelby County Schools.

There is also recent research showing that MTR mentors see a 0.32 S.D. improvement to their own value-added measure in the year they have a resident in their classroom compared to their own prior year value-added measure. This translates to an estimated $50,000 in present value invested in the lives of students learning in this mentor’s classroom during the residency year of training and teaching.

MTR graduates have a median tenure in Memphis high-need teaching of about 5 years after the residency year. Five years of teaching means 5 × $76,000 or $380,000 as the present value of additional future income to be earned by lower-income Memphis students—over and above the baseline increase in earnings that they would experience simply by attending school for a year and being taught by an average SCS new hire. Adding in the value of the additional student growth seen in a mentor teacher’s classroom during the residency year ($50,000), we arrive at $430,000 in estimated present value of the future income gains to be earned by students simply because one effective teacher was recruited, trained and supported by MTR over those six years.

The key in determining whether the significant cost of recruiting, training, and supporting an effective teacher is a good investment is the present value of students’ future income gains that comes on account of having above-average-effectiveness teachers that were trained and supported by MTR. An approximate calculation of return on investment is as follows:

Investment

It costs approximately $46,000 to train and support each additional resident. That is, for MTR to increase our class size by 1 additional resident next year it would cost us $46,000 over that resident’s four-year commitment to MTR.

Short-Term Return

Because the average MTR-trained new-hire sees 1/2 S.D. more growth in students than non-MTR new hires in the district, $430,000 (present value) is soon invested into the “accounts” that represent the future incomes of students. This represents approximately 9× short-term return on investment over the first 5 years of their teaching career.

Long-Term Returns

Because this $430,000 invested in students’ minds is measured in 2019 dollars, the investment of training a single resident will ultimately pay out $2.3 million4 in the future as students who are better educated attain better incomes over their lifetimes.

Total Investment in 2019-2020 School Year

MTR has 252 graduates and alumni in schools this year and 51 residents serving in mentor classrooms serving approximately 12,000 students in Memphis. We estimate that the present value of students’ additional future income from these investments in excellent and equitable education is $21.7 million (252 × $76,000 + 51 × $50,000). This will pay out $117 million in nominal additional earned income over these 12,000 students’ lifetimes.

This analysis looks only at financial benefits to students. The referenced paper also links exposure to highly-effective teachers for a even a single year with higher rates of college attendance, attendance at better-ranked colleges, more savings for retirement, and living in higher-SES neighborhoods in adulthood. Yet, looking just at these financial benefits to students, the return on investment is higher than would be achieved simply by giving the money to disadvantaged students, investing it on their behalf, and letting them draw on it in adulthood. Investments in training teachers are indeed a better investment than putting the money in the stock market.

The research also suggests that students exposed to multiple years of above-average-effectiveness teachers will have layered effects on their income. Each year of exposure to a highly-effective teacher increases estimated lifetime income. This speaks to the power of grouping MTR teachers in partner neighborhoods such that students in these neighborhoods have a higher chance of being exposed to more highly-effective teachers over their K-12 careers. It doesn’t matter who those highly-effective teachers are: MTR doesn’t care if they were trained by MTR or by another program. We simply care that principals in partner neighborhoods have a bottomless pool of high-potential new hires so that they only hire high-potential teachers they believe will be successful and who are likely to have high value-added measures that are comparable to MTR averages.

What does this mean for MTR graduates?

This whole analysis looks at the return on investment for funders who wish to fund excellent teacher preparation that is focused on serving under-resourced communities and schools. Another question remains: how should we look at this from the perspective of an MTR graduate or a prospective applicant to the program? The teacher trained by MTR is indeed making investments in their students’ futures and those investments are not only the intangibles of character, grit, and creativity—they are also financial investments in their students. A recent MTR graduate might expect to be paid in the neighborhood of $45-50,000 a year for their first few years of work in Memphis schools. Yet if this MTR graduate attains the average effectiveness of past MTR grads, the investment they are making in their students is even higher than this: perhaps $76,000. To this we say, great investment!

Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.

-Matthew 6:19-21 (NIV)

Footnotes

  1. The paper’s estimate is actually $130,000 in 2010 dollars which is worth $153,000 in 2019 dollars.
  2. TVAAS is the Tennessee Value-Added Assessment System and is expected to behave similarly to other value-added measures including those used by the researchers in this paper.
  3. The paper assumes wage growth of 2% and a 5% discount rate.
  4. The assumed wage growth of 2% and discount rate of 5% are used throughout the paper and MTR’s estimates to convert nominal future dollars to present value and vice versa.