Teacher incentive reforms in Portuguese public education

This paper studies the effects of incentives in public schools to improve educational outcomes. It contributes to an ongoing debate about how best to design teacher pay systems to enhance student achievement. The authors analyze the effects of a major reform in Portugal, where public-school teachers shifted from guaranteed, tenure-based salary increases to a system in which pay rises depended partly on their students’ academic results, with competition for limited promotions.  

The study finds that introducing individual performance incentives leads to lower student achievement on national exams. At the same time, teachers inflate internal grades—those they assign themselves. The negative impact is significant, amounting to about one-fifth of a standard deviation drop in student exam scores. As the figure indicates, the national exam performance of students in public schools in the continent exhibits a relative decline with respect to students in private schools and schools in Madeira and Azores following the introduction of the reform. These unintended consequences appear to arise from reduced cooperation among teachers and increased administrative tasks, both of which divert attention away from actual teaching.

This evidence suggests that attempts to motivate public employees with competitive, performance-based incentives can backfire, particularly in professions where teamwork and collaboration are critical. While individual incentives might seem intuitively appealing, especially in addressing accountability and efficiency in the public sector, their broader effects must be considered. The study underscores that policy makers should approach incentive reforms cautiously, paying close attention to how such schemes affect cooperation among staff and how the effects on social interactions in turn lead to job satisfaction, and ultimately, the quality of public services delivered.

Click here to go to the paper by Pedro S. Martins and João R. Ferreira