July 18, 2013: The U.S. Air Force is facing another pilot shortage. In this case it’s mostly 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 have 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. Surveys indicate that about 60 percent of those eligible will take the bonus. These pilots can still leave later but will have to repay the bonus. The basic problem here 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.  

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, including for purely military specialists. 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.

It would cost millions of dollars, and nearly a decade of effort, to replace each of those twenty year 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 five years ago but it was not enough to keep many scarce specialists in uniforms.