Cultural Norms vs. Market Norms →
The Air Force has replaced its cultural norms with market norms. And, it cannot compete with the airlines' market power.
Getting back to commitment
In watching the testimony on the pilot crisis, I noted that the Marines do not rely on bonus payments to the same extent as other services. The Air Force has paid a $25K annual bonus for decades that they would like to increase to $35K. In contrast, the Marines haven't offered a bonus since 2011 and plan to offer a temporary, targeted bonus to address its pilot retention concerns.
I recently participated in a conversation about pilot retention during which I learned that a pilot who leaves the service after their initial service commitment and flies for the airlines will make $1.3 million more than if they stayed in the Air Force until 20 years and then began a flying career. I have not verified this number; but, clearly, the Air Force cannot pay pilots a $1.3 million bonus.
After the conversation, I re-read Dan Ariely's book Payoff in which he addresses the long-term effect that bonuses have on worker behavior.
“The bonus, however, would put a numerical value on something that wasn’t countable to begin with: your commitment”
It seems the Marines understood long ago that commitment was not something they were willing to sacrifice by offering extrinsic rewards. They would rather see those who lack commitment leave. Now that the Air Force has established a bonus, pilots have come to expect these payments. Even when the airlines have been in periods of decline, the Air Force has been unable to curtail bonuses. Why? Perhaps, they are in a predicament where they cannot restore intrinsic rewards that build commitment. If this is the case, how does an organization shift from the transactional relationships that bonuses foment and return to a reward mechanism that builds commitment?
Handbook of Defense Economics →
Though dated, the two volume Handbook of Defense Economics (edited by Todd Sandler and Keith Hartley) is a good primer that covers a wide range of post-Cold War defense topics. The first volume was published in 1995 and the second is now 10 years old. Perhaps we'll see a third volume soon. I would like to see research on the principal-agent issues inherent in the Defense Iron Triangle, the implementation of contract theory in procurement, and use of market design in personnel policy.
What would you like to see?
Eisenhower School →
The Eisenhower School at National Defense University offers senior civilians, military officers, and international fellows a master's degree in National Resource Strategy. The curriculum is unique in that it affords an opportunity for students to study an industry related to national security. These studies culminate in a publicly available report.
The current industries under study are:
- Advanced Manufacturing
- Agribusiness
- Aircraft
- Biotechnology
- Education
- Electronics
- Energy
- Financial Services
- Healthcare
- Information Communications & Technology
- Land Combat Systems
- Private Sector Support & Services
- Reconstruction
- Robotics and Autonomous Systems
- Shipbuilding
- Space
- Strategic Materials
- Transportation
- Weapons
Hearing on Military Pilot Shortage →
Today, the HASC Military Personnel subcommittee heard testimony on the shortage of military pilots. Representative Mike Coffman (@RepMikeCoffman) noted "there needs to be an econometric reevaluation [of bonuses] on an annual basis" to adjust incentives in light of the dynamic commercial market for pilots.
The services are also examining non-pecuniary incentives to entice experienced pilots to remain in service. These include lengthening assignments, reducing adminstrative workload, and offering alternative career paths so pilots can remain in the cockpit.
One novel proposal under development would allow military pilots to take career intermissions and begin civilian aviation careers. This may allow military members to begin to accumulate seniority with an airline prior to leaving military service.
It is unclear how the new Blended Retirement System will affect pilot retention.