全球智库信息集成服务系统

• A number of special and incentive (S&I) pays (e.g., occupational pays and hazardous duty pays) already have features akin to a wage differential.
• Incentives to select a longer military obligation contribute to the cost-effectiveness of S&I pays, and eliminating these incentives, as would be done under a wage differential, would decrease cost-effectiveness.
• In the presence of risk aversion, it is cost-effective to compensate for uncertain circumstances such as hostile deployment and variation in supply-and-demand conditions by disbursing S&I pays when the circumstances are realized rather than on a continuous, scheduled basis, as would be done under a wage differential.
• Even if it were desirable to convert such pays into a wage differential, the value to the servicemember in eliminating uncertainty in pay appears to be small.

Special and incentive (S&I) pays allow the Department of Defense to address temporary personnel fluctuations, persistent differences between external pay and regular military compensation, personnel requirements for retention, and variations in external employment opportunities. The authors review Active Component S&I pays and assess the potential for converting some of them into a wage differential, under which such pays would be disbursed according to a stable schedule that could depend on occupation or duty, years of service, and pay grade, a possible advantage to which would be to provide greater stability in pay. They find that a large portion of total S&I pays are already akin to a wage differential, and note that if servicemembers are averse to pay uncertainty, it is more cost-effective to compensate for difficult-to-predict circumstances such as hostile deployment or variation in unemployment with S&I pays that are conditional on the realization of such circumstances rather than on an ex ante basis, as would be the case under a wage differential approach. Additionally, converting these pays to a wage differential would deprive the services of flexibility in responding to certain circumstances. Using RAND's dynamic retention model, they find that S&I pays with an incentive to select a longer obligation are more cost-effective and may be more beneficial than pays without such incentive, as would be the case under a wage differential.

• Chapter One

  Introduction

• Chapter Two

  Which Special and Incentive Pays Are Suitable for a Wage Differential?

• Chapter Three

  Examples of Implementing a Wage Differential

• Chapter Four

  Dynamic Retention Model Analysis of Alternative Wage Differential Approaches

• Chapter Five

  Disbursing Special and Incentive Pay When Uncertainty Is Present

• Chapter Six

  Conclusion

• Appendix A

  Overview of the Dynamic Retention Model

• Appendix B

  Certainty Equivalent Calculation

• Appendix C

  Special and Incentive Pay Concentration: Navy Officers