I believe merit based pay works. It can be a strong incentive under the right circumstances within certain industries. Assuming appropriate compensation (that is, compensation that is comparable to the same work at various employers in similar environments within the same city) to start with and that there is a salary range with realistic rewards based on factors such as continued education and skill development in connection with one's job description, increased productivity, team support and punctuality, merit based pay can be an effective incentive for improvement.
In most, if not all, cases, elementary and middle school teachers in the United States are not compensated according to the training and education required for such positions. Therefore, a consideration of merit-based pay in these scenarios would be irrelevant, and does not warrant a "yes" or "no" vote.
In minimum wage jobs, a merit based increase can be utilized as an effective incentive, particularly if coupled with incentives for advancement.
I know of a large, prominent New York City law firm which has its headquarters in a small city in another state that is hundreds of miles away from New York City. This firm provides annual reviews and salary increases for the New York City based secretarial staff. However, the salary increases appear to bear little or no relationship to the reviews. In other words, one can have a good review but be rewarded a salary increase, with no explanation as to how the increase was arrived at. This has prompted some of the secretaries at this firm to compare their increases by percentage to other secretaries within the firm. It would appear that the one percent increases in several cases were essentially rewarded "across-the-board."
In New York City, for example, nearly everything has increased in terms of cost, a city with one of the highest costs of living in the nation. For example, rents for one-bedroom apartments in some of the outer boroughs have generally increased from last year to this year from a range of $1200 - $1500 per month to $1300 - $1700 per month, coupled with the reality that leases are rarely provided beyond one-year terms and landlards generally do not include heat and electricity, which you are required to pay separately. Electricity has increased substantially over the last year. There have also been substantial increases in bridge and tunnel tolls, taxis and other transportation, fuel, milk and food, as well as increases for nearly every service provider. New York State taxes, which everyone employed in New York City pays, are very high, frequently offsetting the taxes required to be paid if residing in another state and working in New York City.
Secretaries in the above described firm are expected to take on additional assignments, with little additional monetary incentive other than the privilege of keeping the job.
In contrast, the above described secretaries talk among themselves of the enormous amounts of money and effort being expended in the recruitment of new associate lawyers. Needless to say, for some of the more career-minded secretaries, the morale could be better. In other cases, secretaries are simultaneously pursuing other avenues for income and activity unrelated to the firm's.
All forms of legitimate employment deserve respect. There is room for opportunity in any job. Imagine a society without delivery people, armed forces, sanitation engineers, day care providers, food servers, secretaries, medical personnel, security guards, airplane attendants or landscapers. All employees deserve opportunities for participation in programs that provide monetary rewards based on merit. Whenever this is not the case, or if rewards are perceived as merely tokens or arbitrary, these factors can constrain morale and affect productivity.
Everyone has a gift. We are not all alike but can each strive to be the best at whatever it is that we do. Merit based pay does work. It not only acknowledges the value placed on upward mobility and rewards the efforts and accomplishments of individual employees, it contributes to an individual's sense of relevance to a particular job at a particular company.