Incentive-based systems for paying teachers became a hot topic in the 1980s after the publication of A Nation at Risk, which decried the allegedly declining achievement of U.S. schoolchildren. The popularity of incentives among state legislatures and local school boards was fueled by a widely held belief in their logic and simplicity as a tool for improving education: to many policymakers, it seems obvious that money motivates people and that paying all the teachers in a system on a single salary scale, without regard to performance, makes no sense.

Meanwhile, in the research community, there has been almost unanimous agreement that individual teacher incentives—the most common being merit pay—rarely work as they are intended to, for a variety of complex reasons. Now financial incentives to improve schools are again in the news. The states of Kentucky, South Carolina, and Oklahoma and school districts in Dallas, Baltimore, Boston, Denver, and Douglas County, Colorado, have all recently adopted or considered adopting them. Some plans are new versions of the old merit pay idea; others attempt to avoid the pitfalls of individual incentives by rewarding teachers collectively when their schools achieve specified goals.