Effects of Monetary Incentives on Teacher Turnover: A Longitudinal Analysis

• Published date: 01 June 2021
• Author: Sangyub Ryu,Yusuke Jinnai
• Date: 01 June 2021
• DOI: 10.1177/0091026020921414
• Subject Matter: Articles

https://doi.org/10.1177/0091026020921414

Public Personnel Management

2021, Vol. 50(2) 205 –231

© The Author(s) 2020

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/0091026020921414

journals.sagepub.com/home/ppm

Article

Effects of Monetary Incentives

on Teacher Turnover: A

Longitudinal Analysis

Sangyub Ryu1 and Yusuke Jinnai2

Abstract

Teacher turnover has been reported as a strong predictor for students’ academic

achievement, yet little is known about the determinants of teacher turnover. Using

a fixed effects model, we analyze panel data of individual teachers in North Carolina

schools to test the effects of monetary incentives on teacher turnover. We find

a U-shaped relationship between teacher salary and turnover, while the effects of

group-based merit pay on turnover depend on salary level. Assuming that a teacher’s

salary reflects their qualifications, the current study concludes that overqualified and

underqualified teachers are likely to leave and that group-based merit pay causes

turnover among qualified teachers.

Keywords

salary, merit pay, turnover, teacher, performance

Introduction

The process of recruiting and selecting the appropriate human resources generates

high costs. Losing human resources after they have undergone the recruitment process

is thus a great financial loss for an organization (Alliance for Excellent Education

(AEE), 2005; Barnes et al., 2007; Simon & Johnson, 2015; Smith & Watkins, 1978).

Moreover, losing employees lowers organizational productivity as well as workplace

morale (Abelson & Baysinger, 1984; Price, 1977). To reduce this disruption, man-

agement researchers have emphasized the importance of managing turnover (Ryu &

Lee, 2013). Studies on turnover have identified antecedents to turnover based on the

1Yonsei University, Seoul, Republic of Korea

2The International University of Japan, Minamiuonuma, Japan

Corresponding Author:

Sangyub Ryu, Department of Public Administration, Yonsei University, 102 Billingsley Hall, 50 Yonsei-ro,

Seodaemun-gu, Seoul 03722, Republic of Korea.

Email: sangyub@yonsei.ac.kr

921414PPMXXX10.1177/0091026020921414Public Personnel ManagementRyu and Jinnai

research-article2020

206 Public Personnel Management 50(2)

assumption that turnover is inefficient (Price, 1977). However, some studies have

shown that although a high level of turnover negatively affects organizational out-

comes (Abelson & Baysinger, 1984; Meier & Hicklin, 2008), some degree of turnover

is not always unfavorable; for example, a certain level of turnover can increase orga-

nizational outcomes. This U-shaped relationship between turnover and organizational

performance suggests that antecedents of turnover require different treatment. In addi-

tion, research on turnover has typically involved cross-sectional data analyses, which

limits the understanding of turnover determinants (Hom & Griffeth, 1991; Jung, 2010;

Price, 2001; Youngblood et al., 1983). Turnover is the outcome of dynamic decision-

making processes in which individual, organizational, and even environmental ele-

ments are all considered. Thus, to better understand the determinants of turnover, a

longitudinal data analysis is critical. To this end, we analyze teacher turnover using

data from 1999 to 2007 in North Carolina (NC) schools, which are well-known for

their education reform. In academic year 1996–1997 NC public schools introduced a

school-based merit bonus program in which teachers from high-performing schools

received monetary incentives regardless of individual teachers’ quality. Under the NC

public school system, this study explores the nonlinear impacts of salary on teacher

turnover and the moderating impacts of salary on the relationship between group-

based merit pay and turnover. The study makes a significant, theoretical contribution

to knowledge on turnover management in two aspects. First, we find that monetary

incentives can have both negative and positive impacts in managing turnover. The

research presented implies that recruiting and selecting the most appropriate candi-

date, who is neither overqualified nor underqualified, is critical for maintaining low

turnover rates. Second, this study is one of the first pieces of research to analyze lon-

gitudinal data related to teacher turnover.

The remainder of the article is presented in the following order. First, we introduce

NC Public School systems along with their pay systems, which is the major research

context of this study. Then, a literature review on turnover performance is provided,

followed by a literature review on the determinants of turnover alongside the hypoth-

eses developed for this study. Third, an econometric model, data, and variables are

provided, followed by the results of the analyses. Finally, we conclude with a discus-

sion about the implications of this research.

The NC Public School System: Its Background and

Payment Systems

This study seeks to determine how teachers’ qualifications as measured by their salary

level as well as group-based merit pay determine individual teachers’ turnover behavior.

To best answer the research questions, this study focuses on NC’s public schools. In this

section, we briefly introduce NC’s school system, payment system, and bonus system.

First, the state of NC has drawn attention due to its public education reform, as the

state government implemented a carefully designed school accountability program

referred to as the ABCs of Public Education in academic year 1996–1997 (hereafter

1997). The program introduced (a) statewide standardized tests, (b) an accountability