In a previous post, we highlighted the data indicating a shortage in teacher labor markets and offered solutions to address it. But closing the current labor shortage would not necessarily imply that we have invested enough of society’s resources in public schools.

A teacher shortage means that demand for teachers (proxied by vacant positions) is greater than the current supply of willing teachers (proxied by new hires). But the demand side of the teacher labor market is not set through any market mechanism. In this country, we rightly think that education is a public good everyone deserves and, as a result, rely on policymakers to decide how much society should invest in public education. If policymakers set the demand for inputs into public education (like teachers) to be low relative to the socially optimal level of investment in public education (by not allocating enough funding for public schools), shortages are easy to avoid. Yet the absence of a shortage would not mean we got the level of education investment right.

Take one obvious historical example: the collapse in public education spending during the recovery from the Great Recession of 2008–2009. Figure A is replicated from the first post in this series and focuses on the period leading up to and after the Great Recession. It shows that during the recovery from the Great Recession, there was no teacher shortage in the classical sense. In 2008–2009, job openings and hires both decreased and then hires slightly outpaced job openings in the recovery of that recession. Quits also declined, and didn’t return to pre-recession levels until 2013.

In this period, fiscal austerity—at both federal and state levels—squeezed public financing for education. This squeeze reduced the funds available to spend on positions, including teachers, and so the insufficiently few teaching positions that were open were relatively easy to fill. There was no teacher shortage in the classical sense, but the absence of a shortage hid a woefully low level of public investment in education during that time.

One way to check if the demand for educational inputs has been set too low by policymakers is to assess investments in public education relative to the underlying capacity to make these investments. A decent proxy for underlying capacity is gross domestic product (GDP)—how much output is generated in the economy over an increment of time. If this economic capacity grows appreciably faster than public education spending, then one could conclude that this spending is inappropriately low. Figure B maps the change in GDP with changes in public education spending. Both measures are normalized by public school enrollment to make this a more informative comparison: If GDP rose rapidly yet educational spending fell solely due to the demographics of a smaller cohort of school-age children, this would not necessarily be a bad thing. The graph, indexed to 2003, shows that per-pupil educational funding kept up with per-pupil GDP through 2008. In short, the nation’s investment “effort” in education was relatively constant. Yet, in the wake of the Great Recession, fiscal austerity at the state and local level led to a divergence in the country’s capacity for funding education versus actual funding for education. Weak demand for education as a result of austerity measures in public budgets led to higher student-teacher ratios, reduced teacher pay, and reduced job satisfaction, thereby worsening the working conditions on offer to teachers.

What does the optimal demand for teachers look like?

Over the last 20 years, we’ve seen several forms of suboptimal teacher labor markets. Since 2018, the demand has outpaced supply, creating a textbook labor shortage. In the Great Recession, demand didn’t outpace supply, but lackluster public spending on education reduced the overall demand for teachers, almost certainly far below any social optimum.

While we don’t claim any particular year was perfect from the vantage of teacher labor markets, an optimal demand for teachers would reflect a low student-teacher ratio, high levels of teaching satisfaction, and strong wages and benefits. Over the last 20 years, 2008 was recent high-water mark for having one of the lowest student-teacher ratios on record at 15:1. These conditions were met with strong job satisfaction among teachers: The Survey of the American Teacher documented that the share of teachers that were very satisfied with their careers in 2008 was 62%, hitting a high since the survey began in 1984. In 2008, average per-pupil spending on public education matched the rate of growth of GDP per student, suggesting that spending was in line with our capacity to invest in education.

How many extra teachers would we need today if student-teacher ratios remained at 2008 levels? Figure C shows actual teacher employment and projected teacher employment had it kept the same student-teacher ratio it had in 2008. Even accounting for the fact that enrollment in public sector education decreased in the last few years, the gap between actual teacher employment and the teacher employment needed to match student enrollment remains strikingly large. In 2023, we were short 233,000 teachers relative to the socially optimal level of education staffing. Using a different methodology, we came up with a very similar estimate of the total teacher shortage in 2022, suggesting that while this estimate is large, this is the number of teachers we need to have a robust public education program in the United States.

Just because 2008 was a recent high-water mark for U.S. investment in public education, this hardly means that we would not have had large social benefits from investing even more in public schools that year. For example, data on school funding adequacy in 2009 (the oldest year data are available) show districts with more than 15% of students in poverty needed an additional $1,770 per pupil (2009 dollars) to provide adequate education, and that likely didn’t change much between 2009 and 2008. To bring all districts up to adequacy would likely require even more spending than what was spent in 2008.

Conclusion

In Part I of this blog series, we outlined the current teacher shortage and suggested policies to solve this shortage, namely policies that raise teacher pay. Since 2018, job openings have outpaced hires at alarming rates and quits are on the rise. This shortage should be a priority for policymakers.

However, solving today’s teacher shortage would not constitute a silver bullet when it comes to making an appropriate investment in the nation’s public education. Since the onset of the Great Recession, funding for public education has not kept pace with our nation’s capacity to fund education and students have suffered as a result. More funds flowing to the nation’s public schools—particularly funds flowing to low-income and high-poverty school districts—would yield large benefits for students and society at large.

In a separate report, we’ve further shown that Congress has a role they could play by increasing the amount of federal dollars that go to districts across the country. Not only would those funds increase educational capacity, which would support the hiring of teachers, but federal funding is also equity based—with higher-poverty districts receiving a larger share of the funds.