Beth J. Asch

The briefing examines how the pay of enlisted personnel compares to that of their civilian counterparts, how these comparisons have changed over time, how the FY 2000 pay actions affect the comparisons, and how recruiting and retention have fared recently.

The FY2000 National Defense Authorization Act provided authority to members of the armed services to participate in the federal thrift savings plan (TSP), whose structure is similar to the Civil Service Retirement System. A cost analysis by the Federal Thrift Retirement Investment Board found that extending the TSP to reservists is a poor idea because of the excessive cost of administering many small accounts. However, the authors conclude that although reserve TSP accounts are likely to be numerous and small on average, (a) a relatively small number of reservists are likely to participate and (b) reserve accounts will be larger if prior-service personnel can transfer their active-duty balances. They recommend that reserve participants be allowed to contribute more to their accounts; that the possibility of multiple accounts for one person be reduced; and that funding be made available to the TSP Board to adapt its computer system to handle reserve TSP accounts.

Historically among the most cost-effective inducements for recruiting military personnel, the Montgomery GI Bill has helped thousands to serve and pursue a college education following their term. Congress recently has proposed several changes that would bolster the bill's provisions and hopefully boost recruitment during an era when youth are increasingly choosing college alone.

In 1987 a new retirement system, called the Federal Employees Retirement System (FERS), was introduced for federal civil service personnel. Some observers have hypothesized that FERS would alter the retirement and separation outcomes produced by FERS' predecessor, the Civil Service Retirement System (CSRS). This report compares the retirement and separation incentives embedded in FERS versus those in CSRS to see whether the incentives embedded in FERS are consistent with these hypotheses. It also examines which system is more generous in terms of providing greater expected net lifetime earnings and retirement wealth. To compare the systems, the authors compute expected net wealth associated with different separation and retirement ages for a representative individual. The authors also conduct sensitivity analyses to see how their comparisons differ under alternative assumptions. Finally, the authors use data on Department of Defense civil service personnel from fiscal year 1983 through fiscal year 1996 to examine empirically how separation rates differ for early and mid-career personnel under FERS and under CSRS.

Although the military's need for enlisted personnel has declined by almost one-third since the end of the cold war, the armed services are finding it difficult to meet their recruiting goals. Among ongoing changes in the civilian labor market is a strong demand for skilled labor, which has prompted an increasing number of high quality youth to pursue post-secondary education and subsequent civilian employment. Because of this competition for high quality youth, the Department of Defense may want to explore new options for attracting desirable young people into the armed forces. The military, for example, offers a myriad of options for service members to take college courses while in active service. However, the programs do not in fact generate significant increases in educational attainment during time in service. One popular program, the Montgomery GI Bill, enrolls large numbers of individuals, but the vast majority of service members use their benefits after separating from service. Thus, the military does not receive the benefits of a more educated and productive workforce, unless the individuals subsequently join a reserve component. The authors suggest the Department of Defense should consider nontraditional policy options to enhance recruitment of college-bound youth. Recruiters could target more thoroughly students on two-year college campuses, or dropouts from two- or four-year colleges. Options for obtaining some college before military service could be expanded by allowing high school seniors to first attend college, paid for by the military, and then enlist. Or the student might serve in a reserve component while in college and then enter an active component after college. Alternatively, the military could create an entirely new path for combining college and military service by encouraging enlisted veterans to attend college and then reenlist (at a higher pay grade). The most promising alternatives should be evaluated in a national experiment designed to test their effectiveness and cost-effectiveness, similar to the one that led to the creation of the Army College Fund and the Navy College Fund.