More on compensation -- tenure edition

[for Joseph's earlier posts on compensation see here and here.]

We often hear that the labor market will be fine if we just let market forces fix the problem. The assumption is that workers will consider the available jobs, weigh the requirements of each job against the compensation and rationally choose the optimal position. But the assumption behind that assumption is that employers will honor contracts, particularly regarding compensation.

This compensation can take a number of forms (salary, bonuses, pensions, benefits, stock options, etc.) and can be paid out over a variety of schedules. The only thing that matters is that the agreed-upon compensation is paid if the employee completes the agreed-upon duties.

Guarantees of job security are often part of compensation. Think of football coaches and CEOs. Failing to honor these guarantees is no different in either principle or practice from taking a delivery then failing to pay the agreed-upon price.

With that in mind, check out the latest from Colorado:

While other states have tried to modify tenure, Colorado's law was the boldest education reform in recent memory, according to Kate Walsh, the president of the Washington-based National Council on Teacher Quality, which promotes changing the way teachers are recruited and retained, including holding tenured teachers accountable with annual reviews.

Walsh thinks Colorado is now at the head of the pack in the second round of the Obama administration's Race to the Top competition, a $4.35 billion pot of stimulus money designed to prod just such changes.

"If I was a betting woman, I would absolutely put Colorado in first place," she said.

The new law requires teachers to be evaluated annually, with at least half of their rating based on whether their students progressed during the school year. Beginning teachers will have to show they've boosted student achievement for three straight years to earn tenure.

Teachers could lose tenure if their students don't show progress for two consecutive years. That won't be a possibility until 2015, however, because lawmakers slowed down the process under political pressure from the teachers' union. Teachers can appeal dismissal all the way to the state Supreme Court, and school districts have the burden of proving why they should be terminated.

Just a friendly reminder, if you are going to do business with Colorado, insist on being paid first and make sure to count the money. The state isn't that big on honoring its contracts.