We have known that merit pay is often an expensive approach with little to no effect. But maybe we should change this view, as this new study shows that it can have a detrimental effect on segregation:

Teacher incentive pay programs that focused on raising student achievement in high-need high schools expanded the test score gap between Black and White students by between 64 percent and 85 percent.

A more detailed explanation:

The Black-White test score gap has proven to be one of the most persistent phenomena in American education, for reasons that cannot be entirely explained by student characteristics or school and teacher quality.

Teacher performance pay is increasingly common in the United States and often introduced with the goal of reducing gaps in test scores across groups of students. Performance pay aims to directly increase the effectiveness of teaching within high-need schools.

The authors used robust administrative data available in North Carolina to study the impacts of teacher incentive pay programs introduced for teachers in several districts in the state during the 2000s. Teachers in 34 high-need high schools were offered bonuses if their classroom test score averages increased sufficiently on state standardized tests over the course of the school year.

The authors found that performance pay had little impact on average student achievement overall. However, they found a considerable difference in the effect on Black students relative to White students.

Black students experience significantly smaller gains than White students under performance pay, and in some cases actually suffer as a result of the reforms. The result was that the gap in test scores between White and Black students, controlling for other factors, expanded by between 64 percent and 85 percent.

The authors also found some evidence that Hispanic students, like Black students, experience smaller gains than White students. Asian students are not impacted differently relative to White students.

“One potential explanation is drawn from existing work documenting that teachers’ expectations of students differ by student race,” said Andrew J. Hill, an associate professor of labor economics at Montana State University. “When average student achievement is incentivized–as is common in the U.S. and in the programs we studied–teachers may target their attention toward students they expect to achieve higher levels of growth. This may cause gaps to grow between groups of students, potentially by race.”

The authors note their results should not be taken as evidence that performance pay, generally speaking, cannot have a positive impact on reducing test score gaps. Rather, they provide implications for how performance pay programs should be designed to meet the objectives of policymakers.

“We know from previous research that when performance pay explicitly incentivizes helping the lowest performing students, it leads to more attention from teachers and large gains among those students,” Hill said.

Abstract of the study:

Teacher performance pay is often introduced with the goal of reducing gaps in test scores across groups, yet little is known about how well they achieve this aim. We ask, “Do test score-based teacher incentives impact the Black–White test score gap?” Using student–teacher matched data and a difference-in-differences approach in which the performance of a teacher’s students before and after the policy is compared, we find that performance pay increases the conditional Black–White gap. The effect is particularly evident when bonuses are large, consistent with a causal response to performance pay.