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Military Retention Incentives: Evidence from the Air Force Selective Reenlistment Bonus

Author

Listed:
  • Justin Joffrion

    (U.S. Air Force Academy)

  • Nathan Wozny

    (U.S. Air Force Academy)

Abstract

The limited lateral entry and rigid pay structure for U.S. military personnel present challenges in retaining skilled individuals who have attractive options in the civilian labor market. One tool the services use to address this challenge is the Selective Reenlistment Bonus (SRB), which offers eligible personnel with particular skills a substantial cash bonus upon reenlistment. However, the sequential nature of the bonus offer and reenlistment process limits the ability to adjust manpower quickly, raising interest in research that estimates the effect of the SRB on retention. While this literature has acknowledged challenges including potential endogeneity of bonus levels, attrition, and reenlistment eligibility, many studies do not address these concerns adequately. This paper uses a comprehensive panel data set on Air Force enlisted personnel to estimate the effect of the SRB on retention rates. We exploit variation in bonus levels within skill groups, control for civilian labor market conditions, and model reenlistment eligibility to avoid common assumptions that lead to biased impact estimates. We find substantial heterogeneity in the effect of the bonus, with the largest effects on first-term service members and those whose skills have not historically received a substantial bonus. We also find evidence that the bonus affects the timing of reenlistment decisions in addition to their frequency.

Suggested Citation

  • Justin Joffrion & Nathan Wozny, 2015. "Military Retention Incentives: Evidence from the Air Force Selective Reenlistment Bonus," Upjohn Working Papers 15-226, W.E. Upjohn Institute for Employment Research.
    • Handle: RePEc:upj:weupjo:15-226
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Selective reenlistment bonus; Retention; Reenlistment; Timing effect; Labor supply;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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