There’s been a lot of education policy news this week, so when a multi-academy trust employing less than 1% of the workforce announced a plan to offer an alternative pension likely to be taken up by only a relatively small fraction of their staff, it initially seemed like a minor issue. However, as I thought about this policy, I began to consider whether it might lead to a series of events that could disrupt the monopsony labour market.

Our starting point is this monopsony labour market, where there is essentially one ‘buyer’ of labour—the collective of schools that adhere to the Department for Education (DfE) pay scale (or a variant closely aligned with it). This arrangement ensures that most schools do not compete for teachers based on wages. In a previous post about strikes, I noted that depressed wages and systemic teacher shortages are features, not bugs, of a monopsony labour market. These conditions may be rational for the taxpayer, even those who benefit from the service, but they are not favourable for teachers who depend on unions for collective bargaining to counter the government’s wage-setting power.

As I explore how United Learning’s proposed pension arrangements could disrupt this monopsony labour market, I would like you to keep the following in mind:

• I do not intend to describe the specifics of the scheme or its advantages and disadvantages for individual teachers. The details of the pension proposal are not really important to my discussion.
• I approach this topic without any personal stake or belief that one side holds the moral high ground over the other. Jon Coles is one of the most respected MAT leaders, working hard for the best outcomes for his schools. He is offering his staff no deterioration in employment conditions. Meanwhile, the unions aim to protect the long-term rights of workers in a complex labour market. They are both the good guys.

Day 1 – United Learning’s scheme is introduced and taken up by a minority of teachers—a tiny number in relation to those who have already withdrawn from the Teachers’ Pension Scheme (TPS). Do we care? Yes, but not because of the pension arrangements; rather, it’s because of the substantial pay increase these departing teachers are given.

Spring 2025 recruitment round – United Learning’s scheme, which offers teachers the opportunity to be paid more in exchange for reduced pension contributions, attracts a large group of cash-strapped, relatively young teachers to apply for jobs there. Good for ULT. Less good for other schools. For while it might attract new teachers into the market or dissuade others from leaving, in a labour market with systemic shortages, competition for existing teachers has now become a little more challenging. It’s hard to imagine that no other multi-academy trusts will choose to follow suit by introducing similar pay and pension arrangements.

Spring 2026 recruitment round – State-maintained schools, particularly secondary ones, now face considerable disadvantages in the market since they can only offer a pay and pension arrangement that is inflexible and primarily attractive to older teachers. Older, experienced teachers are great, but expensive.

Is the monopsony labour market getting broken? This is the most important question in my story and it depends on how these multi-academy trusts (MATs) choose to set wages in the future. If they all tacitly collude to set the same uplift for their schemes (e.g., DfE pay scale +20%, as many private schools do), they can reap the benefits of depressed monopsony wages alongside the advantages of the scheme. But tacit collusion is unstable.¹ In a market with uneven teacher shortages and clear job delineation (a physics teacher is no substitute for an English teacher), the incentives to break the tacit collusion are high.²

Spring 2027 recruitment round – Multi-academy trusts start to break ranks on the schemes they offer, as it is in their short-term interest. We find well-qualified maths and physics teachers in the South of England can now achieve DfE+30% or DfE+50% if they are willing to join these alternative schemes. “Collective bargaining” is now merely a starting point for a rump of schools, against which individual teachers who are desirable by virtue of their specialisms, skills and location can achieve considerably higher wages. This is achieved through a combination of publicly declared wage deviations and private negotiations at the job offer stage.

This is a story of how a monopsony labour market could be replaced by a typically functioning labour market where wages are determined by supply and demand in the usual way. By the usual way, I mean that the individual bargaining of one teacher for higher wages doesn’t affect wages paid to their colleagues. I don’t know if this will happen — the long-term incentive is still for MATs to lock into fixed wage structures aligned to DfE scales — but if it does, we can make some predictions about who will be better and worse off.

Firstly, I agree with commentators that this scheme is great for ULT teachers who cannot currently afford TPS and have opted out. It also looks pretty good for young teachers who cannot afford a home / have a family and would see considerable personal gains from these salary uplifts by leaving TPS during this part of their lives.

If collective bargaining breaks down, the trade unions are unambiguously worse off since one of their most important functions will have disappeared.

The economics of TPS start to look terrible early on in this process. Given that it is an unfunded pension scheme, it doesn’t really matter. This is just a liability that the Treasury will have to carry for the next few decades.

Economic theory predicts that average teacher wages will rise in a competitive labour market where some will choose to shop around for higher wages.³ However, some individual teachers have far more value than others. Those teaching shortage subjects in the south of England should expect to be much better off under individual wage bargaining. It’s even possible that wages could fall in the long run for small groups of teachers that are oversupplied.

It’s reasonable to assume that future pensions achieved by teachers will fall. While this isn’t intrinsically true with the new schemes, as it depends on the contributions that the employee chooses to make, we know that people tend to undervalue future benefits relative to immediate ones. There is no reason to think that teachers will be any different.

Taxpayers will benefit from a less generous pension but suffer from more costly wages. As wages become more unequal across the country, the DfE may have to review differential school funding in regions beyond London. While they will benefit in the long run from lower pension obligations, this will be offset by likely higher average salaries.

The interim period of a transition to a new system is unambiguously bad for local-authority-maintained schools, who will be forced⁴ to compete for teachers against schools offering a choice of salary-pension packages that are particularly attractive to younger teachers (who are in turn attractive to schools because they are less expensive).

The interim period will see gains for the MATs who break ranks and improve the quality of education by attracting teachers to address specific shortages. However, in the long run, they will give away their monopsony power and suffer all the downsides of a competitive labour market.

There’s an alternative world where this ULT policy isn’t a big deal, where other MATs don’t follow suit, and central wage bargaining along with TPS survive intact. However, as we embark on this path of decentralising pay and conditions, we must recognise the potential ripple effects. This policy shift could reshape the landscape not just for those within ULT schools but for teachers across the country. Instead of evaluating each incremental move in isolation, we need to consider how to steer these changes in a direction that benefits the teaching profession and society as a whole.

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1. If the MATs band together to introduce a single alternative pay and pension arrangement, they could succeed in maintaining collective bargaining. ↩︎
2. Some might argue this new scheme represents merely a small step from the status quo where private schools and some larger MATs already deviate from the DfE pay scale. I’m sympathetic to this argument, though I view the private school market as quite disconnected because career moves back and forth between the sectors are difficult to navigate. Time will tell. On balance though, I think what differs here is the potential magnitude of the pay uplift for those who would prefer a lower pension contribution and the extent to which this scheme will spread across the sector since it can be cost-neutral to MATs. ↩︎
3. Some might argue this is impossible where the government sets overall budgets and where teacher pay is a large proportion of a school budget. I’m not sure this is quite right. A school that chooses to run a high pay/quality teacher model does have operating choices to keep costs under control: raising pupil-teacher ratios by curtailing GCSE/A Level small option classes, smaller senior management team, favouring cheaper but suitably specialised inexperienced teachers, fewer teaching assistants, technology-supported intervention groups and cover lessons, and so on. ↩︎
4. I think. As far as I know, local authorities can’t innovate on pay and conditions. ↩︎