Public schools traditionally pay teachers based on how long they've been in the classroom rather than on how well they've taught their students.

Now that seniority system faces a major challenge. Last week, New York City Schools Chancellor Joel Klein proposed promoting a "culture of excellence" by awarding merit bonuses to effective teachers.

Administered fairly, merit pay could serve as an incentive that provides higher compensation to teachers who sharpen their skills and improve student learning.

But in spite of broad support for merit pay by many business leaders and school administrators, teachers and their unions typically have opposed such plans. They fear that administrators would award large bonuses to a few favored teachers, shortchanging most other faculty members.

Several promising developments can address those concerns. They include:

Objective merit standards. States and the federal government require more frequent testing of students using increasingly sophisticated exams. For the first time, administrators can quantify how much knowledge a teacher imparts to students.

Higher salaries. Research shows that better teachers cost more. Performance-based pay can persuade results-minded legislators to approve larger salary increases.

Klein's proposal gives a timely boost to a budding performance-pay movement. In January, the Teaching Commission, a panel of business leaders and educators studying ways to improve teacher quality, recommended moving away from pay raises based largely on time served in the classroom. And a Boston-based non-profit group, the Community Training and Assistance Center, recently released a study of a Denver merit-pay experiment that lets teachers draw up their own goals for boosting student performance. The conclusion: It works.

In spite of the findings, continued skepticism among teachers threatens to stall the reform drive. One possible solution is to make performance pay part of broader salary reforms that include rewards for teaching in tough schools and bonuses for hard-to-find science and math teachers.

Such arrangements are worth a try. But more important than the structure of any plan is its ability to use financial incentives to attract and keep stronger teachers.