Research for Lump-Sum

An assessment of the costs and benefits that would result if the Navy were it to substitute lump-sum Selective Reenlistment Bonuses (LSSRBs) for its current program of anniversary payment SRBs (APSRBs). The principal argument in favor of this policy change is to capitalize on sailors’ preferences for receiving payment in the here and now: in front-loading payments, the Navy could offer smaller SRBs without reducing the value that Service member’s place on these bonuses. The principal argument against paying out lump-sum SRBs is that the prospect of receiving anniversary payments acts as an incentive for sailors to remain in the Navy during their term of reenlistment, and eliminating these would increase losses from the Service. Our analysis suggests that adopting LSSRBs would likely result in significant savings over the long term, even accounting for the possibility of increased losses (these savings would be especially great for smaller SRBs that are offered for shorter reenlistments). We also find that the policy change could have substantial non-monetary costs and benefits: adopting LSSRBs would result in the SRB program being easier to manage when the economy is contracting, but more difficult to manage when the economy is expanding.