Can u guys explain in economics why are teachers underpaid?

The average CEO salary for an S&P 500 company is $13.5 million and the average NBA salary is $4.9 million. Are teachers underpaid? Explain in economic terms how a business decides the amount to pay its workers. If you apply for a job or have a job, what must you do to earn more money?

Answer:
Teachers are paid what their bosses think they are worth. In a public school setting, their bosses are the school board members, who are elected officials. In order for teachers to be paid more, taxes would need to be raised. Raising taxes is extremely unpopular, and would get the elected officials voted out of office.

Plus, I wouldn't exactly say teachers are underpaid. My sister and brother-in-law are both teachers. Together, they earn over $100k per year... for working 9 months out of the year.

A CEO is paid what the board of trustees wants to pay them. CEOs are responsible for ultimately increasing the value of stock.

It takes a lot more talent to be a CEO of an S&P 500 company than it does to be a teacher.
1. They get the summer off.
2. Your answers below:
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It all comes down to the value you add to your company, both tangible and intangible.

- Make yourself so valuable that you it would be very difficult to replace you.
- Always think about the customer, and how you can increase the value of your product for them.
- Think of ways that you can generate more revenue for your company. If your company has profit-sharing, make sure your performance objectives have a lot of company goals.

In one way or another, all of this applies to business executives and athletes. Teachers have the handicap of not being in a big revenue-generating business. Also, they are at the mercy of tax and other government funding, which also limits their income. And the product they produce are educated young people, which brings more benefit to society than it does to the teacher.
There are about a million factors that go into why teachers are underpaid. But before that you have to realize that the one thing economics can not decide for you is what is "fair". You may look at NBA player vs teacher and say the salary difference is not fair. Econ can not tell you if that is true or not. If you decide something is "fair" or "not fair", you can then use econ to try and fix the problem, but econ can not tell you the actual fairness of something.

Getting to the actual teachers though. There are two main reasons I believe (I am not an education policy expert, so this is a partial guess). The first one is a concept of supply and demand. Just like any good, labor (jobs) work off the same principles of supply and demand. There are people willing to work as teachers at what we pay them, so the price is not going to rise (there is an equilibrium in the labor market for teachers).

The second reason, and this gets more into "fairness" is that many Republicans don't want to spend more on public schools (I am assuming you mean public school teachers). A lot of Republicans think that the entire Dept of Education is a waste and that it should be gotten rid of, thus they fight very hard to try and limit any more spending that might go towards helping teachers make more. This all gets very complicated, and like I said I am not an expert, so I am going to stop there. Oh, and Republicans aren't the only ones that don't like the DoE, I'm not trying to throw political muck, it is just that most anti-DoE things you hear are from Republicans.

As for your second part, the more general question of how businesses decide what to pay labor... Well there are entire chapters of textbooks that talk about how businesses decide that. Mostly it again has to do with labor supply and demand. A firm knows it needs x number of workers to make itself work and so it will pay the lowest it can to get those workers (which may not always be low - thus NBA players making $4.9M). There are a lot more technical things that go along with this, but if you are interested in really getting into it, go look up labor markets and labor economics (wikipedia is a good start).

Finally for how you would make more money, the simplest economic answer is that you just make yourself the most valuable. People pay for things because they are scarce, so if you are unique for the job (or you do well enough that the company feels it can't lose you), they will pay you more because of your uniqueness (there are only so many "you's" in the labor force). This is why things like McDonald's pay so cheap, there is no scarcity. Anyone can work a cash register, so McDonald's doesn't have to pay a lot to find someone willing to do the job.

Of course, whether that is fair is a whole other issues (and not one economics can solve ;) )
Its just supply and demand.
For eg in NBA the demand to watch games are very high while the supply is artificially limited by the NBA.
If demand is high why dosen't NBC broadcast other basketball games with the NBA - its called monopoly.
CEO pay is more elastic. On an average the more the CEO makes for the investors the more he makes.
Public school teachers are in a controlled system and so the salaries are unelastic.
Teachers are only underpaid if there aren't enough people to do the job (acceptably well) at the wage that's being offered. There might be plenty of people willing to play in the NBA, but the number of individuals who are good enough is small (you need to be freakishly tall, athletic, practice a lot, etc.). There are only a very few top CEOs and they are even rarer. The problem with teachers is that the official qualification is low (go to college, get a certification), so that there are lots of people willing to teach even at low wages. (Lots of people might play basketball for free but you wouldn't pay very much to watch them!)

We general like to think people are paid relative to their contribution on margin to the firm (ie: you're worth what the firm would make without you and with the next guy instead).
Having a superstar player might make your team more than $20million a year in income (more seats, more TV revenues, etc.) than having some average player. Likewise goes for CEOs -- if a really good CEO can make the company $100 million that an average CEO might not have made the company and that they're generally not bringing money in to the firm (the school? town?). The question the firm decides when figuring out how much to pay someone is: how much would the next best guy do this job for? and how much more money will we make with this guy rather than the next best guy? We believe they basically choose wages so they are indifferent between the two options.

If you ever have a job, the key is to "add value" where you work, by bringing in money for the firm. The other way you can increase your value is to be able to do things that most people cannot do that are valuable to the company (write computer programs, find tax loopholes, invent new products). Skills need to be both rare and valuable (most tend to be one or the other).
In an open capitalist system, anyone who is working is neither under or overpaid... Assuming equilibrium if teachers weren't being paid enough, then there would be a shortage of them, the fact that there is no shortage of teachers suggests that they are not underpaid... Much of a teacher's reward can be described as psychic income, the psychological feeling that many people have when they perform a job that is seen by society as useful and honorable (jobs such as teachers, firefighters, and EMTs don't pay very well, but rarely see a shortage of applicants...)
Workers are paid a salary set as enough to encourage people to do their jobs, but as low as possible for the maximum profitability of the company...
It could be suggested that the quality of the employee is raised by raising the wage of the job, in theory a higher wage will draw more applicants and thus the selection process can be more selective, theoretically leading to a better prospective employee...
No, new teachers can make up to $40,000/year in large cities for working 9 months a year.

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