A record number of American public-school teachers have walked off the job over the past two years—and now another strike looms in Chicago. Chief among the teachers’ demands is higher pay. They’re often right—teacher pay is too low—but for the wrong reasons.

Teachers and their unions typically attribute low salaries to flat or falling state spending on education, with skinflint politicians to blame. But in most places education spending is rising. It isn’t showing up in teachers’ paychecks because so much of it gets diverted...