Beth J. Asch

A Theory of Compensation and Personnel Policy in Hierarchical Organizations with Application to the United States Military

A large literature attempts to explain compensation and personnel policies in large organizations. Three features of the U.S. military system—flat rank spreads in pay, a relatively generous pension, and heavy reliance on up‐or‐out promotions—are at variance with common practices in large civilian organizations. This article develops a model of individual decision making in a large, hierarchical organization and uses the model to explain these apparent puzzles. The lack of lateral entry and heterogeneity in entrants’ abilities and preferences for military service play key roles in the observed policies.

The economic theory of a military draft reconsidered

During the debate over conscription in the United States over 20 years ago, most economists argued that a volunteer force was unequivocally more efficient than a draft force. But Dwight Lee and Richard McKenzie recently demonstrated that under certain conditions conscription will be more efficient. However, Lee and McKenzie omitted some important determinants of the relative efficiency of a volunteer system from their analysis. Using their framework as a starting point, this paper develops a more comprehensive model of optimal military manpower procurement system choice. The key findings are that (1) productivity considerations tend to make the volunteer force the more efficient force and recent trends in technology have arguably accentuated this tendency but (2) the larger is the level, and the elasticity, of demand for defense, the more likely the draft is to be the optimal procurement method.

New Economics of Manpower in the Post-Cold War Era

Since the publication of Volume 1 of the Handbook of Defense Economics, key events have shaped the defense manpower research agenda and called for research to help policymakers deal with the challenges that these factors presented. One event was the end of the Cold War, which permitted drastic force reductions in the USA and elsewhere and enabled many NATO members to eliminate conscription. A second event was a rise in college attendance in the USA, which led to recruiting difficulties despite the reduction in accession demand. A third event was increased operational tempo of US forces abroad. Fourth is the rising cost of US military entitlements and a shift toward a greater share of military compensation being deferred. This chapter reviews the recent work that economists have supplied in response to these events. Studies have analyzed the dramatic trend toward volunteer forces in Europe, seeking to explain why some countries chose to end conscription while others did not. Studies of US enlistment supply have estimated the effect of rising college attendance on enlistment and evaluated strategies for mitigating its effect. Studies of operational tempo have provided new theoretical insights about the relationship between operational tempo and retention and empirical evidence about this linkage. Improvements have been made to models relating compensation to retention, and the models been used to address issues relating to the structure of compensation. This chapter reviews these studies and other new contributions to the defense manpower literature. Reserve force issues remain a neglected research area. Despite the heavy reliance on reserve forces in recent US operations abroad, little is known about how changes in activation expectations and activation duration affect reserve recruiting and retention. Such analysis is needed to guide reserve compensation and personnel policy, and this topic represents an important area for future research.

Cash Incentives and Military Enlistment, Attrition, and Reenlistment

Abstract : Between FY 2000 and FY 2008, the real Department of Defense (DoD) budget for enlistment and reenlistment bonuses increased substantially, from

The Retirement Behavior of Federal Civil Service Workers

266 million to

Themes in defence manpower economics and challenges for the future

625 million for enlistment bonuses and from

The effects of workforce-shaping tools on retirement: the case of the Department of Defense civil service.

891 million to

Exploring Voluntary Retirement Incentives for Teachers: Effects on Retention and Cost in Chicago Public Schools

1.4 billion for selective reenlistment bonuses. Congress and GAO have raised questions about the effectiveness of bonuses, what the services received for this large increase in bonuses, whether bonuses were paid to individuals who would have enlisted or reenlisted in the absence of bonuses, and whether other policies might have been more effective in maintaining or increasing the supply of personnel to the armed forces. This monograph provides an empirical analysis of the enlistment, attrition, and reenlistment effects of bonuses, applying statistical models that control for such other factors as recruiting resources, in the case of enlistment and deployments in the case of reenlistment, and demographics. Enlistment and attrition models are estimated for the Army and our reenlistment model approach is twofold. The Army has greatly increased its use of reenlistment bonuses since FY 2004, and we begin by providing an in-depth history of the many changes in its reenlistment bonus program during this decade. We follow this with two independent analyses of the effect of bonuses on Army reenlistment. The results from the models are consistent, lending credence to the robustness of the estimates. One approach is extended to the Navy, the Marine Corps, and the Air Force, to obtain estimates of the effect of bonuses on reenlistment for all services. The estimated models are used to address questions about the cost-effectiveness of bonuses and their effects in offsetting other factors that might adversely affect recruiting and retention, such as changes in the civilian economy and frequent deployments. The report should be of interest to policy makers concerned with military recruiting and retention and to defense manpower researchers.

Workforce Downsizing and Restructuring in the Department of Defense: The Voluntary Separation Incentive Payment Program Versus Involuntary Separation

We examine the retirement behavior of federal civil service workers. This research contributes to the literature that more generally examines how retirement behavior responds to financial incentives. The civil service workers in our study provide an interesting case study because they do not participate in the Social Security system, they are only covered by a defined benefit pension plan, and this pension plan is significantly different from the Social Security system in the structure of its incentives. Moreover, there is widespread concern among policy makers of a pending retirement crisis in the federal civil service. Relying on an option value framework, our main results suggest that federal civil service workers respond to their retirement incentives in a manner that is quite similar to the responses that others have found looking at much different retirement systems. Such a result provides important additional evidence regarding the generality of previous results. On the other hand, unlike previous studies, we find little evidence of a spike in the retirement rate at age 65, nor do we find much evidence of “excess retirements” or a large fraction of retirements at age 65 that are unexplained by our financial incentive model. While past studies have attributed this age 65 effect to “social norms,” those norms do not seem important to the federal civil service workers we study.

Retaining U.S. Air Force Pilots When the Civilian Demand for Pilots Is Growing

Raising and maintaining military forces have posed enormous challenges for the United States and its allies. Economists have made significant contributions to understanding of how to recruit and manage such forces. This paper highlights key past contributions and discusses challenges for future research. Rapid changes in the roles and missions of military personnel, technology, and the civilian labor market pose serious challenges for future military manpower policy and will challenge economists to develop new approaches to military recruiting and personnel management. Yet the body of past research can continue to provide insight and guidance in making decisions about defense manpower.