Wednesday, April 28, 2010
Tweet[IWS] RAND: THE ROLE of INCENTIVE PAYS in MILITARY COMPENSATION [28 April 2010]
IWS Documented News Service
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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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RAND
The Role of Incentive Pays in Military Compensation
JAMES HOSEK
CT-345
April 2010
Testimony presented before the Senate Armed Services Committee,
Subcommittee on Personnel on April 28, 2010
http://rand.org/pubs/testimonies/CT345/
or
http://rand.org/pubs/testimonies/2010/RAND_CT345.pdf
[full-text, 9 pages]
[excerpt]
Incentive pays help the military compete in the labor market in a cost-effective way. Rather than
increasing military pay for all, incentive pays increase military pay selectively. Incentive pays are
a means of targeting higher pay to where and when it is most needed to ensure an adequate
supply of manpower. Because incentive pays are targeted, they are less expensive than an
across-the-board increase in military pay. Some incentive pays such as sea pay or aviation
career incentive pay are highly stable additions to foundation pay. Other incentive pays such as
enlistment and reenlistment bonuses can be turned on and off as needed, and this flexibility
means that they offer a fast, well targeted, and temporary increase in pay. Similarly, deployment
related pays such as hostile fire pay and the combat zone tax exclusion are viewed as a just
recognition of special sacrifices and risk attached to deployment to a hostile area.
Incentive pays are paid to those people on the brink of enlisting or reenlisting who wouldn’t have
enlisted or reenlisted without getting these pays. But they are also paid to those who would have
enlisted or reenlisted even without the bonus. For instance, all service members who reenlist in a
specialty covered by a bonus will receive a bonus, though some would have reenlisted without a
bonus. The fact that some individuals are paid more than they need to be paid to reenlist is not
unique to military incentive pays but is a common feature of labor markets. The market-clearing
wage is the wage needed to hire or keep the worker on the margin and is higher than needed for
workers below the margin. But all workers receive the market wage because if they didn’t they
could seek work in a different market, and they have no incentive to reveal that they would accept
less than the market-clearing wage.
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Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
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