Pay Scale, teachers receive additional allowances for housing, medical expenses and conveyance, and these allowances can vary (Idara-e-Taleem-o-Aagahi, 2013). One feature of teachers’ wages that we emphasize is that these are not ’lock-step’ schedules with zero flexibility, since teachers teaching at similar levels may receive different allowances, and there is some flexibility in the salary band.

Whether public sector teachers’ wages in Pakistan are ‘adequate’ depends on the comparison. Comparisons with Indian states show that both Pakistani and Indian teachers earn, on average, 5-7 times GDP per-capita (Siniscalco, 2004 and Aslam, 2013). Comparisons with other professions again suggest similar levels of remuneration relative to other professionals. Each of these has obvious problems. Comparisons across countries require that teachers are efficiently compensated in the “benchmark” country. Comparisons across professions are subject both to selection concerns and differences in the job profiles across occupations.<sup>15</sup> Teacher salaries in the private sector provide an alternative benchmark. Andrabi et al. (2008) show that teachers’ wages in private schools were one fifth of teacher salaries in public schools in 2003-2004, and public school salaries have only grown relative to private school salaries since then (Figure 1). Similar wage gaps have been documented in Colombia, the Dominican Republic, the Philippines, Tanzania, Thailand, and India (see Jimenez et al., 1991; Muralidharan and Kremer, 2008). These large wage premiums may reflect a lack of accountability and the strength of teachers’ unions rather than greater productivity. Absenteeism is high in the public sector, and firing is rare since teachers are protected by permanent contracts (Chaudhury et al., 2006). In our sample, public school teachers self-reported absences of 2.6 days per month compared to 1.9 days per month for private school teachers. Recent research accounting for selection bias in both Pakistan (Andrabi et al., 2010) and India (Muralidharan and Sundararaman, 2015) shows that attending private schools, despite a lower per-student cost, improves student outcomes.

Unfortunately, a direct public-private comparison of the wage gap is also confounded by the large differences in observed teacher characteristics between the two sectors. Appendix Table A1 shows the large differences in training (90% versus 22% in the public relative to the private sector), education (51% hold a bachelor’s degree versus 26%), gender (45% female versus 77%), and local residence (27% local versus 54%). Private school teachers also report 11 years less teaching experience on average. Using an Oaxaca-decomposition exercise, Andrabi et al. (2008) argue that controlling for observed characteristics explains little of the wage gap between public and private school teachers, but there is currently little direct evidence on the link between pay and productivity in the public sector.

> 15Comparisons from the Pakistan Labor Force Survey show that the wages of teachers were 80% of those of “professionals,” and 110% of all professions combined (Aslam, 2013). These comparisons are fraught with selection concerns as most formal sector jobs are in urban areas or also in the public sector, with the same wage setting rules.

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