It will create uncritical 'learning drone' students.  Teachers will start 'teaching to the test' to ensure their classes make the grade. Independent, creative, self-reliant thinking will therefore be discouraged as the teacher focuses on getting as high test results for their pupils as they can regardless of whether they really understand the concepts behind what they are doing. If the primary goal of education is to create critical thinking citizens, then merit pay may hinder rather than help achieve that goal.