Human Capital, Bonuses, Compensating Differentials and Air Force Pilot Retention

摘要

Air Force pilot turnover has been particularly high in recent years. Retention rates dropped so precipitously that Congress recently authorized doubling the size of Air Force pilot bonuses just to stop the hemorrhaging. Low retention rates imply that the Air Force is not offering a competitive wage; pilots are finding better opportunities in other occupations, especially in employment with the civilian airlines. There are numerous studies addressing the economics of labor retention and turnover in general, and there are several analyses of the problem of Air Force personnel retention specifically. The economic analysis of pilot retention is inextricably linked to the economics of labor compensation. Asch (1993) has surveyed the economics literature and pointed out how economic theory applies to designing an efficient military compensation system. Her survey reveals how broad the relevant economic issues are. Among the pertinent economic issues that Asch identifies are the economics of internal labor markets, industrial organization, imperfect and asymmetric information, moral hazard and adverse selection, risk aversion, efficiency wages, tournament theory, human capital theory, and the economics of retirement pay. Indeed, these are but a few of the economic issues pertinent to labor turnover in general, and Air Force pilot retention specifically.