Reenlistment Bonuses and Retention Behavior

This report considers three outcomes for military personnel nearing a reenlistment decision point — reenlist, extend, or leave — and investigates whether bonuses increase the proportion of personnel staying in service (the retention rate), and whether bonuses affect the selection of longer terms of service (i.e., raise the reenlistment rate over the extension rate). The authors used continuation rate data from the Defense Manpower Data Center for mid-FY 1976 through FY 1981. For each of over 500 occupations across the four services they computed reenlistment, extension, and retention rates at six month intervals, providing a total of 11 observations for each occupation in the analysis file. To these data they added information on reenlistment bonus coverage and amount, a military/civilian wage index variable, the unemployment rate, the percent of personnel without a high school degree or GED, and the percent black. Their analysis supports the contention that lump sum bonuses are more cost effective than installment bonuses in increasing the expected man years of service in a military occupation.