Research for Annualized Cost of Leaving (ACOL)

The Navy has two pays designed to help attract and retain aviation officers: Aviation Career Incentive Pay (ACIP) and Aviation Career Continuation Pay (ACCP). In principle, these tools provide the Navy with the capability to offer compensation to aviators in order to meet its requirements. This study examines the empirical relationship between financial incentives and retention of aviation officers, as well as the relationship between civilian labor market conditions and aviator retention. Our analysis suggests that increases in relative military pay do lead to increases in pilot retention. Responsiveness to compensation is highest for propeller pilots and lowest for helicopter pilots. In contrast, we do not find any statistical evidence of a relationship between pay and Naval Flight Officer retention. We suspect that this is due to the lack of variation in retention over the time period on which we focus, rather than to the absence of a behavioral response. We also observe a negative relationship between civilian labor market conditions and pilot retention. In principle, increases in ACCP can offset the deleterious effect of a healthy civilian airline industry on pilot retention. For Naval Flight Officers, we do not find any statistical evidence of this relationship.