The study also showed primary and secondary pupils’ happiness, attainment, and grades would all be increased by the move.
The research by economist Dr Joshua Fullard, from the Department of Economics, revealed the test scores would increase by the same level as reducing class numbers by one pupil.
He studied international data between 1995-2015 and 27 years of the UK’s Labour Force Survey for his research which showed a wage increase, could raise grades and pupil happiness.
Whilst examining teacher pay Dr Fullard also discovered that most of the profession earn less than other graduates.
He said: “While there are a range of other factors that are likely to affect teacher motivation, my research indicates that money matters.
“Salaries are not only important for the recruitment and retention of excellent teachers: they also help ensure that teachers feel valued and motivated.
“A pupil who is taught by a teacher with a higher salary will do better in school and have a higher level of wellbeing.
“Teachers’ wages tend to grow at a slower rate than they would expect in an alternative profession.
“Therefore, I estimate that between 88,500 and 110,000 classroom teachers, almost 1 in 3, would be financially better off in an alternative profession.
“We are very fortunate that personal motivations ensure that there are enough professionals willing to do this critically important job. However, we might not be so lucky in the future.”
Dr Fullard found an across the board pay hike would not necessarily provide value for taxpayers.
A ten per cent increase for primary school teachers alone would cost roughly £1.3billion according to the study but cutting class numbers by one pupil would be £232million.
The study suggests a conditional wage increase, based on attainment, could be more effective.
The study also showed that more experienced teachers are more responsive to wage differentials than less experienced colleagues.
This comes as the government is committed to increasing less experienced teachers’ salaries by roughly 24 per cent.
This is significantly more than the – eight per cent - more experienced colleagues will receive.
He fears this may adversely affect teacher effort and hit pupil attainment.
Dr Fullard added: “While giving a significantly higher pay rise to less experienced teachers makes sense from a recruitment and retention perspective to many more experienced teachers this will seem like a kick in the teeth.
“After all, some would argue that it’s the teachers who have remained committed to the profession who most deserve to be rewarded, not new entrants.” v
Dr Fullard also highlighted there is no strong evidence that teachers could leave the profession for a higher paying occupation.
The study was carried out for the ESRC Research Centre on Micro-Social Change at the Institute for Social and Economic Research and is published in the Institute for Social and Economic Research’s Working Paper Series.