Hedonic and Comparable Wage Indices: The Effect of Adjusting WI Wages

Prepared for the CPRE Conference on School Finance, School

Improvement, and Teacher Compensation

byMichael Goetz

February 2007

Goals of an Hedonic Wage Index

he·don·ic Pronunciation: hi-'dä-nikFunction: adjective1 : of, relating to, or characterized by pleasure2 : of, relating to, or characterized by hedonism

How much more or less does it cost to recruit and employ similar school personnel (i.e. exhibiting similar discretionary factors) in different school districts (characterized by different sets of cost factors)… (Chambers, 1981)

Factors

* Indicates use in regression

Controllable Factors Uncontrollable Factors Staff Qualifications Total Years of Experience* Highest Degree Achieved* Teacher Assignment (Full Time, etc)* Quality of College Attended

School District Conditions 4th Grade Prof/Adv %* 10th Grade Prof/Adv % School FRL School ELL* School Disability Share School Size Class Size Graduation Rates Suspension Rates* Geographic/Location Measures Locale* Median Housing Value* Distance to 50K City Climate

RegressionDependent Variable: Salary

Coefficient Std. Error Significance

Base $15,212 $415 .000*

Years of Experience $1,755 $10 .000*

MA $6,151 $49 .000*6-Year Specialist Degree $6,966 $578 .000*Ph.D. $9,151 $454 .000*

Mid-Size City $6,404 $151 .000*Urban Fringe of Large City $7,579 $162 .000*Urban Fringe of Mid-Size City $4,341 $167 .000*Large Town $7,804 $309 .000*Small Town $4,568 $169 .000*Rural, Outside CBSA $2,172 $171 .000*Rural, Inside CBSA $3,689 $182 .000*

Suspension % $49 $9 .000*LA4 % Prof/Adv $56 $4 .000*Model ELL $234 $7 .000*

Median Home Value (per $100,000 value) $2,111 $0 .000*

Locales• Large City (Locale 1): A principal city of a Metropolitan Core Based Statistical Area

(CBSA), with the city having a population greater than or equal to 250,000.• Mid-sized City (Locale 2): A principal city of a Metropolitan CBSA, with the city having a

population less than 250,000.• Urban Fringe of a Large City (Locale 3): Any incorporated place, Census designated

place, or non-place territory within a Metropolitan CBSA of a Large City and defined as urban by the Census Bureau.

• Urban Fringe of a Mid-sized City (Locale 4): Any incorporated place, Census designated place, or non-place territory within a Metropolitan CBSA of a Mid-sized City and defined as urban by the Census Bureau.

• Large Town (Locale 5): An incorporated place or Census designated place with a population less than 25,000 and greater than or equal to 2,500 and located outside a Metropolitan CBSA or inside a Metropolitan CBSA.

• Small Town (Locale 6): An incorporated place or Census designated place with a population less than 25,000 and greater than or equal to 2,500 and located outside a Metropolitan CBSA or inside a Metropolitan CBSA.

• Rural, outside CBSA (Locale 7): Any incorporated place, Census, designated place, or non-place territory not within a Metropolitan CBSA or within a Metropolitan CBSA and defined as rural by the Census Bureau.

• Rural, inside CBSA (Locale 8): Any incorporated place, Census designated place, or non-place territory within a Metropolitan CBSA and defined as rural by the Census Bureau.

Example Indexes

District CWI

APPLETON AREA 0.99BERLIN AREA 0.99EAU CLAIRE AREA 1.00FLORENCE 0.99JANESVILLE 1.01LADYSMITH-HAWKINS 0.93MADISON METROPOLITAN 1.02MENOMONEE FALLS 1.04MILWAUKEE 1.09NIAGARA 0.88RACINE 1.06SHOREWOOD 0.98WAUNAKEE COMMUNITY 0.99

Comparison Of IndexesMSA Imazeki CWI Goetz HWI

Appleton 0.92 1.00Barron/Polk 0.89 0.98Central WI 0.84 0.99Duluth-Superior 1.02 1.00Eau Clair 0.99 0.98Fond Du Lac 0.92 0.97Grant/Richland 0.95 0.94Green Bay 1.04 0.99Janesville 0.94 0.99Kenosha 1.02 1.04La Crosse 0.96 1.00Madison 1.09 1.00Milwaukee 1.05 1.03Minneapolis 0.99 1.00North Central 0.86 0.97Northwest Wi 0.91 0.96Peninsula 0.90 0.97Racine 1.04 1.05Sheboygan 0.81 0.99South 0.90 0.98Wausau 0.95 0.99West WI 0.94 0.99

WI Adequacy Study

• Evidence-based model

• School level, rolled to district, rolled to state

• Applied CWI and HWI to salaries

• CWI saves $500 million over a $9 billion system

• HWI saves $0

WI Districts by Locale

WI Pupil Count by Locale

Comp Wage/Hedonic Comparison by Locale