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Research Questions

  1. Will the Reserve Components (RC) be able to sustain their desired force size and shape under the new approach to reserve compensation proposed by the 11th QRMC?
  2. Will Active Component (AC) retention be affected?
  3. Is supplemental pay needed in the RC under the new approach, and if so, how much?
  4. Does the proposed approach increase cost?
  5. Do the results differ for enlisted versus officer personnel by branch of service?

Because Reserve Component (RC) members are increasingly used in an operational capacity, the 11th Quadrennial Review of Military Compensation has proposed paying reservists daily basic pay and allowances equal to Active Component (AC) members, regardless of type of duty. To analyze the new compensation policy, RAND used a stochastic dynamic programming model of AC retention and RC participation to simulate the effects of 11 variants of the proposal on AC retention, RC participation, and cost relative to the current baseline approach for RC officer and enlisted personnel for all four service branches. The new approach RAND considered has four elements: regular military compensation (RMC) paid for each day of reserve service; 53 RC retirement points, one for each day of service; retirement eligibility after 30 years of service; and supplemental pay. A key finding is that the new approach — with supplemental pay set to hold RC prior force size constant — is less costly than the baseline. This holds whether supplemental pay is a flat-amount per year or an amount targeted to mid-career years. The new approach can meet RC force requirements, even in the absence of a decrease in retirement age, but supplemental pay is critical to ensure that the RC meets its desired force size. Another advantage of the proposed compensation policy is that it offers the opportunity for enhanced force management flexibility as force requirements and economic conditions change.

Key Findings

The new approach to reserve compensation proposed by the 11th Quadrennial Review of Military Compensation

  • Can sustain RC force size and shape for officer and enlisted forces by branch of service
  • Has negligible or minor impact on AC retention
  • Decreases personnel cost
  • Achieves these results only if accompanied by supplemental RC pay, either as a flat amount or an amount targeted to mid-career years of service.

Recommendation

  • The proposed approach to reserve compensation is viable, improves the alignment between active and reserve compensation, and supports operational use of reserve forces. The Department of Defense should carefully consider its implementation

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Contextual Background

  • Chapter Three

    Compensation Alternatives

  • Chapter Four

    Results

  • Chapter Five

    Discussion and Conclusions

  • Appendix A

    Data and Methods

  • Appendix B

    Additional 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.

This report is part of the RAND Corporation monograph series. RAND monographs present major research findings that address the challenges facing the public and private sectors. All RAND monographs undergo rigorous peer review to ensure high standards for research quality and objectivity.

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