Do retention bonuses work? Evidence from the U.S. Air Force

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Recognizing that skilled service members often have attractive options in the civilian labor market, the U.S. military offers substantial cash bonuses aimed at increasing retention rates.

In a recent Upjohn Institute working paper, researchers Justin Joffrion and Nathan Wozny use panel data on enlisted Air Force personnel to estimate the effectiveness of the Selective Reenlistment Bonus (SRB), a substantial cash bonus offered to eligible enlisted service members “in military skills with either demonstrated retention shortfalls or high training costs.”

Their analysis of the data reveals which groups of individuals were more responsive to the SRB, with the largest effects observed for first-term service members and those whose skills have not historically been targeted for substantial reenlistment bonuses. They also find that the SRB affects the timing of reenlistment decisions in addition to their frequency, and that changes in the impact of the SRB over time suggest a need for flexible bonus strategies.

Finally, while Joffrion and Wozny studied U.S. military personnel, they feel that their results would also be of interest to civilian employers who face similar employee retention issues.

Read Military Retention Incentives: Evidence from the Air Force Selective Reenlistment Bonus, by Justin Joffrion and Nathan Wozny.