Merit Pay Works Better if You Fear a Loss Rather Than Anticipate a Gain

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Dylan Matthews describes a recent field test in paying teachers if they get higher-than-average test score improvements from their students:

The authors split teachers in the study into a control group, who were not offered any rewards, a “gain” group, which was promised rewards of up to $8,000 at the end of the school year, and a “loss” group, which was given $4,000 upfront and asked to pay back any rewards they did not earn….Additionally, the gain and loss groups were split, with a “team” group being rewarded on the basis of theirs and fellow teachers’ test scores, and the “individual” group being reward only on the basis of their own scores. The conclusion: it worked, and it worked almost twice as well when the money was given at the start and then taken away.

This is a fascinating piece of confirmation that loss aversion is very real as a motivating factor. People respond far more strongly to the threat of loss than they do to the prospect of gain. In this case, teachers in the loss group did twice as well even though their reward per point of improvement was half as big. On the other hand, there was very little difference between team motivation and individual motivation.

Beyond that, though, I’d take this study as suggestive, but not conclusive. The gain group showed very tiny overall improvements in student performance, and none of the improvements were statistically significant. The loss group did better, showing gains of about seven percentile points.

But I’m still a bit puzzled. If I’m reading the results correctly, teachers in the gain group could expect $4,000 if their students produced average results, and $80 per percentile point extra if they did better than average. In the end, they produced results two percentile points better than average. Teachers in the loss group were paid $4,000 at the beginning of the year, and had to pay back $40 per percentile point if their kids did worse than average. They ended up producing gains of about seven points. (See Table 3 in the study here.)

This means that on average, teachers in the gain group earned $160 extra ($80 x 2) while teachers in the loss group gained $280 ($40 x 7). But the teachers must have known beforehand that their rewards were likely to be very small compared to the $4,000 baseline: In theory, they could earn thousands of extra dollars, but only by being supermen. The authors don’t say how well the very best teacher did, but based on their summary results the top teacher probably generated an improvement of about 15 percentile points compared to average. That’s a reward of $600 above the baseline. And that’s the best result. This kind of money seems like it’s far too small to produce any kind of serious impact.

So something about this doesn’t really add up. Maybe I’m interpreting their results wrong, but I simply don’t see how expected rewards this small could generate such significant improvements. Somehow, the baseline extra pay of $4,000 must have played a role here. right?

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate