November 19, 2013: Earlier this year, faced with yet another pilot shortage, the U.S. Air Force sought to address the problem by offering large bonuses if pilots would stay in uniform. This is not working. The target for this effort was about 250 fighter pilots, each with ten years’ service and all eligible to leave the air force soon. Even though there are fewer overseas assignments to Afghanistan and the Middle East these days, most of these pilots had expressed an interest in getting out, either to fly in the commercial sector or switch careers. Because of the heavy demand for experienced pilots in the combat zone in the last decade and the recent recession, many pilots stayed in. Thus the air force was able to cut back on training new pilots and many of the pilots used for training new ones were sent into action. But with the war on terror (at least the Afghan and Iraq portions) over and airline hiring way up, pilots with ten years in are looking for a change.

The air force has done the math and realized that it would be cost-effective to offer large bonuses ($225,000) to get these pilots to sign up for nine more years. Initial surveys indicated that about 60 percent of those eligible would take the bonus. The surveys were wrong because the growing political pressure to cut the defense budget, and the resulting cuts in flying hours, persuaded most eligible pilots to turn down the bonus offer and take the growing number of offers to become a commercial pilot. The basic problem here for the air force is that it costs over $5 million and at least five years to replace these ten-year pilots. The air force has found that paying up to $25,000 a year to persuade pilots to stay in is a good investment. Now the air force is faced with the prospect of either increasing the bonus (which might not work) or deal with a pilot shortage the much more expensive way via recruiting and training.

It’s not just the air force doing this sort of calculation. The other services continue to offer similar bonuses for those in key jobs as an inducement to remain in uniform, or to persuade other troops to undergo training and switch to jobs that are hard to fill. The U.S. Army has long been the most frequent user of bonuses but with the war winding down, there is less money available for this. For example, the max bonus has been reduced from $150,000 to $90,000 and there are more restrictions on who can get a bonus.

This specialist shortage has been a growing problem and not just for technical specialists. Purely military specialists also need these inducements. Currently, the military spends about half a billion dollars a year for bonuses, although during the height of the Iraq war that more than doubled. While some of this money goes to combat specialists, most of it is paid to non-combat experts. Three years ago the army implemented a new bonus system for scarce medical and other technical specialists. The new program enabled the military to pay market rates for specialties like brain surgery and Internet security. In the past the bonus program was not directly linked to the market salaries for needed specialists, who would not join and work for existing pay levels linked to rank and time in the service. In many cases, where specialists were needed for a short time, qualified civilians were hired as temporary contractors. This was a lot more expensive.

In wartime, with an all-volunteer force, bonuses were paid just to get recruits for all sorts of jobs. But in the last three years the army (which paid most of these bonuses) sharply cut back on its enlistment and re-enlistment bonus program, mainly because the economic recession reduced the competition recruiters get from civilian employers. The bonuses have quickly slid back to their pre-Iraq levels.

But in some areas there were no cuts. In the last six years the U.S. Department of Defense has paid over $200 million in retention bonuses to over 2,000 experienced Special Operations operators. Most of those getting the bonuses were Special Forces and SEAL personnel who were eligible for retirement and being offered high paying civilian security jobs or simply the prospect of relaxing. Appeals to patriotism and bonuses of up to $150,000 persuaded many of those operators to stay in uniform. This was a bargain for the government, as well as for the troops in question. While the war on terror is winding down for most of the military, for SOCOM (Special Operations Command) there is still a lot of work.

It would cost millions of dollars, and nearly a decade of effort, to replace each of those twenty year SOCOM vets. Bonuses of under $100,000 worked for troops not yet eligible for the half-pay pension and are now attracting some operators who can retire. Most of the billions in bonus money always went to a small number of specialists, like Special Forces, SEALs, explosives disposal (they deal with roadside bombs), intelligence, and electronics specialists.

The bonus program has been around for decades but has been used more aggressively in the last decade, as the civilian economy boomed and increasingly saw highly skilled military personnel as potential hires. Recruiters, while not admitting it, look forward to an occasional recession to take the heat off. They got a major recession in 2008 but it was not enough to keep many scarce specialists in uniforms.