The United States seems to be launching another round of efforts to change how teachers are paid. The path to teacher compensation change is not easy, but there are new ideas about how to pay educated workers, such as teachers, on bases other than years of experience, education units, and degrees. This publication examines state and local efforts to change teacher compensation and proposes strategies that are appropriate for education. It examines past and present practices, such as "merit pay" and "career ladder" approaches, then proposes new ways to compensate teachers, including skill-based pay, pay for knowledge, and group-based awards linked to school results. Recent findings are presented followed by a discussion on how these new approaches work to boost teacher morale and professionalism and improve schools. The eight chapters cover: (1) how teachers are compensated; (2) what has been learned from attempts at change; (3) elements of pay and compensation; (4) relationship between pay and motivation; (5) rewarding individual teachers for developing needed competencies; (6) making part of compensation contingent on teacher activities; (7) school bonuses for improved student performance; and (8) implementing better compensation systems for school improvement. Principles for implementing change in teacher compensation are outlined in the appendix. (Contains 203 references.) (ND)