An Evaluation of the Relative Efficiency for Various Relevant Labor Markets: an Empirical Approach for Establishing Teacher Salaries

Abstract

Costs associated with teacher salaries are relative in that these costs are referenced to a relevant labor market rather than based on the absolute value of the services provided by teachers. Because the selection of a relevant labor market can substantially influence the costs associated with teacher salaries, a field study was conducted to assess the relative efficiency of four different labor markets that could be used to establish teacher salaries. Within this study, specific economic principles are used to define different labor markets for teachers, and these different labor markets are cast within a randomized block design. Efficiency of these markets was defined from a least squares perspective and was assessed relative to a beginning teacher salary and to an average teacher cost. Results of a MANOVA indicate that some labor markets are more efficient for determining the average teacher salary, and all markets are equally efficient for setting beginning salaries for teachers.