Financial constraints in paying teachers

Teacher’s salaries constitute the majority of national education budgets, accounting for 75% of primary education budgets on average (The World Bank, 2011). With the expansion of primary schooling, many countries face financial constraints and are unable to adequately pay salaries for the increased required amount of teachers. This prevents new hiring and when currently employed teachers are not being paid sufficient salaries, can also result in attrition, poor teacher motivation, and poor teacher qualifications. Governments may respond to salary constraints by increasing pupil-teacher ratios, or reducing spending on other items within the education system affecting overall schooling quality. The amount of funds spent on teacher salaries is therefore inextricably linked with school quality and access.

Policy options to address financial constraints are based around increasing funding, through increased tax revenue, support from donors, and expanded national commitment to education budgets. Governments can also improve their financial planning mechanisms using simulation models, and revise priorities within the education budget. Short-term fixes include contract teachers, having communities or NGOs pay for teacher salaries, and increasing non-monetary benefits in lieu of salaries.

Promising policy options

Increase the overall government budget through tax revenue 

Increasing national tax revenue is key to expanding education financing. This can be achieved through measures to build up a progressive tax system, fairer taxation of multinationals and corporations, reducing exemptions and ineffective incentives, and reducing corruption and tax avoidance. Reducing tax exemptions alone could have a significant impact on the overall education budget. For example, in Kenya, it was estimated that total incentives and exemptions in 2012 equaled $1.1 billion a year, which could double the public primary education budget (Mowe and Walker, 2016).

Increase tax revenue, which can be done by building up a progressive tax system, which includes tax wealth, corporations, property, high-level incomes, and limit regressive taxes that burden the poor such as VAT. Include the informal sector in tax collection and diversify the tax base, including small and medium businesses.

Eliminate tax breaks and exemptions, particularly the following incentives which are not shown to be strong determinants for investment: discretionary incentives, tax holidays, free zones and stability agreements.

Close loopholes that allow tax evasion, and push for stronger tax and royalty arrangements for extractive industries. Reduce corruption by giving civil society roles in overseeing budgeting processes.

Finally, reduce energy subsidies and reduce international restrictions on government borrowing.

Increase government spending on the education sector

It is generally recommended that governments spend at least 20% of public expenditure and 6% of GDP on education (Mowe and Walker, 2016; UNESCO, 2014). When there is inadequate funding, spending on teachers is often the area where cuts are made. Good quality education simply cannot be provided without a sufficient amount of domestic expenditure being allocated to the education sector, which may require reprioritizing and cutting back in other sectors.

Commit to designating at least 20% of government budgets to education. Reprioritize and rationalize spending in other sectors, including reducing energy subsidies, examine defense spending, and examine debt servicing.

Reduce corruption and advocate for the public demand for education, to add political pressure to increase the portion of government spending allocated to education. 

Improving planning systems and education financial simulation models

Education financial simulation models help calculate the required number of teachers and determine what financing gaps may exist and what external funding is required. This tool can be used to demonstrate the trade-offs among teacher remuneration and other educational expenses, test the sustainability of salary policies and compare different scenarios.

The tool should be a transparent process, that integrates sub-sectors into the same simulation model to verify agreement of policies. Include more detailed teacher information within simulation models, with attention to the long-term impacts of teacher salary policies. This includes having teacher salaries expressed in the local currency rather than the share of GDP, including details such as incentives, salaries, and total number within distinct teacher categories, and including information on how individual teacher’s salaries evolve and how they are affected by policies.

Beyond using simulation models, decisions about the teacher salary policy and associated trade-offs require substantive discussions among technical and political members of the Ministry of Education as well as between the MoE and different levels of national and civil society stakeholders such as the partner Ministry of Finance, Ministry of Planning, relevant NGOs, teacher unions and external partners.

Other policy options

Funding support from development partners 

Commitments from international donors can help bridge the financing gaps that may still exist even after governments have committed 20% of national budgets to education. International partners can also support strengthening developing country’s tax systems and reducing multinational tax avoidance to increase developing countries’ national revenue.

It is important to have a long-term commitment to close financing gaps. This will must be predictable and it needs to aim at supporting countries to develop sustainable domestic financing, which in turn allows countries to set their own priorities. Another strategy is to assist in strengthening tax systems and preventing tax avoidance including supporting international tax transparency initiatives.

The International Monetary Fund and other international donors sometimes request the MoF to implement wage bill caps on public sector employees as a condition for loans, in efforts to restrict public spending and maintain fiscal balance. However, wage bill caps can have negative consequences in the education sector, including preventing additional teachers from being hired or paid, restricting donors from paying teacher salaries, discrepancies in pay between rural and centrally located teachers and the informal recruitment of new teachers (Dolan and Golden, 2012). Removing or raising wage bill caps can prevent these issues and allow new teachers to be hired and sufficiently paid.

Revise priorities within the education budget and/or adjust pupil-teacher ratios

In order to increase the number of funds devoted to teacher salaries within the education budget, governments can reduce spending on non-salary budget items, such as pedagogical and administrative expenditure. Alternatively, or concurrently, pupil-teacher ratios can be increased to reduce the total amount of teachers being paid. Such decisions will affect overall schooling quality, scope and access and governments need to very carefully consider the trade-offs and the effects on the education system as a whole.  Financial simulation models can be used to inform these decisions about education budget trade-offs (see the section above).

Contract teachers

Some countries have responded to situations of limited funds by appointing contract teachers, who are hired on a temporary basis. Contract teachers can include para-professionals, community members and volunteers and often have fewer qualifications and training and receive lower salaries than permanently hired teachers with no access to benefits such as pensions or social security. This raises clear quality issues, as well as a concern that a dual system will be created, further harming the overall esteem of the teaching profession. However, it does offer a short-term solution when funds for teacher salaries are scarce and allows flexibility and local connection. Professional development and training should be provided to contract teachers with opportunities for them to become fully qualified.

Communities and NGOs pay for teacher salaries

When the government is unable to pay for teacher salaries, community groups may take on the task themselves, either paying salaries directly or supporting community school management teams. This was done in Afghanistan, by the Partnership for Advancing Community Education in Afghanistan (PACE-A) a collective of international NGOs, who supported community management teams to organize cash or in kind-payments for teacher salaries (Dolan and Golden, 2012). In the DRC, parents directly paid “teacher incentives” which was the only source of income for 1/3 of teachers (World Bank, 2010). One advantage coming out of this approach is that it can encourage communities to take an active role in monitoring teacher quality. However, this should be a short-term and last resort policy option, as it is foremost the responsibility of the government to provide adequate teacher salaries.

Increasing non-monetary compensation in lieu of salaries 

In the short term, allotting or increasing non-monetary teaching benefits can compensate for restrictions on teacher salaries. However, this is only an interim solution as perpetuating a system of inadequate pay will negatively affect teaching quality.

Non-monetary compensation/benefits can include:

• housing;
• farm produce;
• medical care;
• farmland and supplies;
• Teaching kits;
• leave provisions;
• continuous professional development opportunities; and
• promotion opportunities.

Policy options for improving Equity and Inclusion

Gender-responsive policies

No specific gender policies apply in order to tackle general financial constraints to adequately pay salaries for the increased required amount of teachers. Thus, all of the policies and strategies previously recommended can be implemented.

Furthermore, it is indispensable to make sure that they are inscribed within a global strategy meant to build and finance a gender-responsive, inclusive education system. (For more information on how to finance an inclusive, equitable education system consult the Policy page Budget allocation and financial incentives).

*For specific details concerning gender pay gaps consult Policy page Teacher incentives.  

Policies for children with disabilities

All of the policies and strategies previously recommended apply for this category.

It is important to ensure that they are inscribed within a global strategy meant to build and finance an equitable, inclusive education system. (For more information regarding how to fund an inclusive and equitable mainstream education system consult Policy page Direct cost of schooling and Equity and inclusion Section).

Policies for displaced populations and host communities

All of the policies and strategies previously recommended apply for this category.

It is important to ensure that they are inscribed within a global strategy meant to build and finance an equitable, inclusive education system. (For more information regarding how to fund an inclusive and equitable mainstream education system consult Policy page Direct cost of schooling and Equity and Inclusion Section).

Policies for minority populations

All of the policies and strategies previously recommended apply for this category.

It is important to ensure that they are inscribed within a global strategy meant to build and finance an equitable, inclusive education system. (For more information regarding how to fund an inclusive and equitable mainstream education system consult Policy page Direct cost of schooling and Equity and Inclusion Section).