1 Teacher Responses to Early Retirement Incentives and the Effect on Student Performance

Since the Great Recession, education programs across the United States have faced steep budget cuts, resulting in increased teacher layoffs. To overcome budget shortfalls, many states and school districts have increasingly turned to early retirement incentives (ERIs), which reduce costs by decreasing the number of more experienced and higher paid staff. Yet, little is known about how these incentives affect students. In this paper, I study the impact of ERIs on student performance during a period of high layoffs in California. California provides an interesting case study due to its “Last in First Out ” (LIFO) reverse seniority layoff policy. Many school districts used ERIs to reduce their workforce, removing their most experienced teachers instead of only their least experienced teachers. Using a newly assembled panel dataset of school district ERI policies and a difference-in-differences strategy, I exploit within-state variation in the timing of ERI introduction. I find evidence that ERIs generally improved California Standards Test (CST) scores, particularly for high school students. This paper provides new evidence suggesting that lower-quality and highly-experienced teachers responded to ERIs, with positive impacts on student achievement