The Effect of Voluntary Financial Incentives on Separation Rates for Mid-Career Military Personnel
Abstract
At the end of the 198Os, the Department of Defense (DoD) began drawing down the size of the U.S. military's active force, from a post-Vietnam peak of 2.2 million in FY 1987 to 1.6 million by FY 1997, a decline of about 25 percent. Initially, the focus of the drawdown was on cutting the number of entrants into the armed forces, but DoD also needed to reduce the number of mid-careerists. To accomplish this reduction in personnel while treating service members fairly and maintaining a high state of readiness, DoD chose to rely on voluntary rather than involuntary separations. Between January 1992 and October 1995, DoD instituted a temporary program to offer mid-career personnel a financial incentive to separate voluntarily from the service. The Voluntary Separation Incentive/Special Separation Benefit (VSI/SSB) program was offered to individuals who possessed certain combinations of occupation, rank, and years of service. Under the program, eligible service members could choose from two alternative separation benefits. VSI offered members an annuity payable for twice as long as their years of service and equal to 2.5 percent of basic pay times years of service. SSB offered members a one-time lump sum equal to 15 percent of basic pay times years of service. Both programs required takers of the benefit to serve in a reserve component. Since the program's completion, two key policy questions have remained: Did the program induce substantial separations over and above what would normally have occurred, and did it induce more low-quality than high-quality personnel to leave?
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 2002
- Accession Number
- ADA400775
Entities
Organizations
- RAND Corporation