Research for Pay

Over the past several years, the military has faced mounting recruiting, reenlistment, and manning difficulties. One perceived reason for these difficulties is increased competition for skilled personnel from the private sector, particularly through its incentive pay and benefit offerings. Although the recent softening of the economy may help to ease some of these competitive pressures, other less cyclical trends -such as a smaller high-school graduate recruiting pool and lower propensity to enlist in the military-persist. These trends suggest that a careful survey of the private-sector incentive pay and benefits landscape is needed. In this paper, we compare and contrast the incentive pay and benefit offerings of large, private-sector firms to those of the military. In doing so, we assess whether these offerings differ significantly in their provision, scope, or structure. We also consider whether these offerings have played a role in the military's recent recruiting, reenlistment, and manning difficulties. Finally, we describe the offerings of several private-sector companies that are likely to compete with the military for skilled personnel. We find significant differences in military and private-sector incentive pay and benefit provision of incentive-based pay, health care and retirement benefits, education and training services, child care, workforce flexibility measures, and Morale, Welfare, and Recreation (MWR)/other quality-of-life programs. In most cases, military benefits are broader in scope, differ in structure, and involve less choice than those offered by the private-sector. Taken together, these trends suggest several recommendations that could help the military in its recruiting, retention, and manning efforts.

As the longest economic expansion in history continues, the competition between the private sector and the military for able personnel intensifies. This competition has prompted renewed interest in the benefit and incentive pay programs that large, private-sector firms offer. As part of the Navy's FY 2000 Manpower and Personnel Integrated Warfare Architecture (IWAR), the Director of the Assessment Division (N81) has asked CNA to examine the provision of various benefit and incentive pay programs in the civilian sector. Of particular interest is the provision of such programs among large, private-sector firms that are considered strong competition in the market for skilled labor. This annotated briefing provides some context for the discussion by describing the current recruiting and retention difficulties of both the military and large, private-sector firms, and explains our choice of research methodology for assessing benefit and incentive programs currently offered to workers in large, private-sector firms.

Early in FY00, the U.S. Army asked each of the other services to consider joining it in proposing, through the Unified Legislative and Budgeting (ULB) process, legislation that would change the military's personnel target from an end-strength goal to a goal based on average strength, calculated across the fiscal year. The Deputy Chief of Naval Operations, Manpower and Personnel (N1) asked CNA to evaluate the average-strength scheme to help the U.S. Navy formulate its response to the Army. We provided the N1 staff an earlier draft of this report that raised concerns about the scheme (as this final version of the report continues to do). The Navy shared the draft report with the Army, which decided not to continue pursuing the proposal.

The Personnel Readiness Division of the Joint Chiefs of Staff (J1) asked CNA to examine the earnings of enlisted personnel and to compare them with the earnings of similar people in the civilian labor market. We used multiple regression to estimate civilian earnings of non-college-graduates and used these models to predict the earnings potential of enlisted military personnel. We found that earnings in the civilian and military sectors are similar and that both fell, when adjusted for inflation, between 1992 and 1996 (the year for which the most recent civilian data were available).