Effects of Bonuses on Active Component Reenlistment Versus Prior Service Enlistment in the Selected Reserve

by James Hosek, Trey Miller

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Abstract

The reserves are increasingly being called on to take part in the nation's military operations. This has brought new importance to reserve readiness, but at times during 2004 to 2009 the Army National Guard, the Army Reserve, and the Marine Corps Reserve experienced manning shortfalls that were due in part to an inadequate inflow of recruits. A major source of reserve manpower is the flow of enlisted members from an active component (AC) to a reserve component (RC). This volume examines how effective RC bonuses are in attracting prior service members and, in doing so, explores how AC and RC bonuses interact to affect both AC reenlistment and prior service enlistment in the Selected Reserve. It presents a theoretical model of a service member's decision to stay in the AC, join the RC, or become a civilian; offers empirical estimates of the effect of bonuses, deployment, and other factors on this decision; and develops models of bonus setting based on these estimates. A key finding is that higher RC bonuses increase RC enlistment, but they also decrease AC reenlistment; likewise, higher AC bonuses increase AC reenlistment and decrease RC enlistment. These cross-effects are a result of rational supply behavior and cannot be eliminated, but awareness of them and coordination between AC and RC bonus setters can help ensure that bonus budgets are set appropriately and used efficiently.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Background

  • Chapter Three

    Data and Methods

  • Chapter Four

    Empirical Results and Predictions

  • Chapter Five

    Bonus Setting and Bonus Cost in the Active and Reserve Components

  • Chapter Six

    Conclusion

  • Appendix A

    Data

  • Appendix B

    Issues in Estimating Bonus Effects

  • Appendix C

    First-Term Regression Results

  • Appendix D

    Second-Term Regression Results

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted within the RAND National Defense Research Institute, a federally funded research and development center sponsored by OSD, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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