Military Compensation in the Age of Two-Income Households Adding Spouses’ Earnings to the Compensation Policy Mix
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THE ARTS This PDF document was made available from www.rand.org as a public CHILD POLICY service of the RAND Corporation. CIVIL JUSTICE EDUCATION ENERGY AND ENVIRONMENT Jump down to document6 HEALTH AND HEALTH CARE INTERNATIONAL AFFAIRS NATIONAL SECURITY The RAND Corporation is a nonprofit research POPULATION AND AGING organization providing objective analysis and effective PUBLIC SAFETY solutions that address the challenges facing the public SCIENCE AND TECHNOLOGY and private sectors around the world. SUBSTANCE ABUSE TERRORISM AND HOMELAND SECURITY TRANSPORTATION AND INFRASTRUCTURE Support RAND WORKFORCE AND WORKPLACE Browse Books & Publications Make a charitable contribution For More Information Visit RAND at www.rand.org Explore Pardee RAND Graduate School View document details Limited Electronic Distribution Rights This document and trademark(s) contained herein are protected by law as indicated in a notice appearing later in this work. This electronic representation of RAND intellectual property is provided for non-commercial use only. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. Permission is required from RAND to reproduce, or reuse in another form, any of our research documents for commercial use. For information on reprint and linking permissions, please see RAND Permissions. This product is part of the Pardee RAND Graduate School (PRGS) dissertation series. PRGS dissertations are produced by graduate fellows of the Pardee RAND Graduate School, the world’s leading producer of Ph.D.’s in policy analysis. The dissertation has been supervised, reviewed, and approved by the graduate fellow’s faculty committee. DISSERTATION R Military Compensation in the Age of Two-Income Households Adding Spouses’ Earnings to the Compensation Policy Mix E. Casey Wardynski RAND Graduate School This document was prepared as a dissertation in May 2000 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of James Dertouzos (Chair), Bart Bennett, and Dean Dudley. The RAND Graduate School dissertation series re p roduces dissertations that have been approved by the student’s dissertation committee. RAND is a nonprofit institution that helps improve policy and decisionmaking t h rough re s e a rch and analysis. RAND® is a re g i s t e red trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. © Copyright 2000 RAND All rights reserved. No part of this book may be re p roduced in any form by any e l e c t ronic or mechanical means (including photocopying, re c o rding, or information storage and retrieval) without permission in writing from RAND. Published 2000 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA90407-2138 1200 South Hayes Street, Arlington, VA22202-5050 RAND URL: http://www.rand.org To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Internet: [email protected] iii CONTENTS CHAPTER 1, RESEARCH OBJECTIVES AND BACKGROUND ……………………………………………………… 1 Objectives …………………………………………………………………………………………………………………………………… 1 Background …………………………………………………………………………………………………………………………………… 4 Regular Military Compensation ………………………………………………………………………………… 8 The Impact of Migration ………………………………………………………………………………………………… 11 Options & Analytic Emphasis ……………………………………………………………………………………… 15 CHAPTER 2, REVIEW OF PREVIOUS RESEARCH ………………………………………………………………………… 17 The Conceptual Framework ……………………………………………………………………………………………… 17 Empirical Findings within Civilian Households ……………………………………… 19 Empirical Findings within Military Households ……………………………………… 22 Earnings Estimates Using the 1985 CPS …………………………………………………………… 23 Estimates of Employment Status, the 1985 DoD Survey ……………………… 26 Findings Based Upon the 1985-CPS and DoD Survey ………………………………… 29 Prospective Research ………………………………………………………………………………………………………… 30 Conclusions ………………………………………………………………………………………………………………………………… 32 CHAPTER 3, THE FEASIBILITY AND EFFICACY OF REDUCING MILITARY MIGRATION ……………………………………………………………………………………………………………… 34 Why Military Families Migrate ………………………………………………………………………………… 34 THE RETENTION CONSEQUENCES OF DEPLOYMENTS ………………………………………………… 40 Deployments Rather than Forward Basing as a Means to Reduce Migration …………………………………………………………………………………………… 40 Estimating the Spouse Earnings Benefit ………………………………………… 42 The PERSTEMPO Implications of a Deployment Strategy ……… 43 Findings from Earlier Research ……………………………………………………………… 45 METHODOLOGY FOR GAUGING THE PERSTEMPO AND RETENTION NEXUS ……… 45 Measuring PERSTEMPO …………………………………………………………………………………………… 46 FSA II and HFP as Deployment Indicators ……………………………………… 47 Limitations of the DMDC Deployment File ……………………………………… 48 Methodology ………………………………………………………………………………………………………………… 52 Retention Model Results ………………………………………………………………………………………………… 53 Conclusions ………………………………………………………………………………………………………………………………… 54 iv CHAPTER 4, THE WAGE EARNINGS OF MILITARY WIVES …………………………………………………… 56 Introduction ……………………………………………………………………………………………………………………………… 56 Conceptual Framework ………………………………………………………………………………………………………… 57 Earnings Functions ……………………………………………………………………………………………………………… 57 Human Capital and Earnings ………………………………………………………………………………………… 59 Accounting for Wives' Labor Supply …………………………………………………………………… 59 Wives' Reservation Wage ………………………………………………………………………………………………… 61 Modeling Wives' Wage Earnings ………………………………………………………………………………… 62 Current Population Survey Data ……………………………………………………………………………… 62 Modeling Approach ………………………………………………………………………………………………………………… 64 Descriptive Statistics …………………………………………………………………………………………………… 69 Regression Results ……………………………………………………………………………………………………………… 70 Labor Force Participation …………………………………………………………………………………………… 70 Wives' Wage Earnings ………………………………………………………………………………………………………… 74 General Findings …………………………………………………………………………………………………………………… 74 Wives with Any Earnings ………………………………………………………………………………………………… 76 Wives with Full Time Earnings ………………………………………………………………………………… 79 Adjustment for Measurement Error ………………………………………………………………………… 82 The Genesis of the Wage Penalty …………………………………………………………………………… 85 Labor Market Conditions and Wives' Earnings …………………………………………… 85 The 1992 DoD Survey …………………………………………………………………………………………………………… 86 Interservice Earnings Differences ……………………………………………………………………… 88 Interservice Earnings Results ………………………………………………………………………………… 91 Local Effects on Spousal Earnings ……………………………………………………………………… 94 Earnings Across Army Installations …………………………………………………………………… 99 Local Earnings and Employment Results ………………………………………………………… 103 Conclusion ………………………………………………………………………………………………………………………………… 108 CHAPTER 5, IMPROVING THE LABOR MARKET OPPORTUNITIES AND OUTCOMES OF MILITARY WIVES ……………………………………………………………………………………………………………………… 116 Policy Overview …………………………………………………………………………………………………………………… 116 Local Labor Conditions and Military Service Operating Considerations ……………………………………………………………………………………………………… 118 The Federal Employment Earnings Premium …………………………………………………… 120 Department of the Army Civil Service Employment ……………………………… 120 Increasing Federal Employment of Soldiers' Spouses ……………………… 126 A New Spouse Hiring Authority ……………………………………………………………………………… 129 Army Benefits from Spouse Employment …………………………………………………………… 130 v Implementing a Spouse Hiring Authority ……………………………………………………… 132 AREAS FOR FURTHER POLICY RESEARCH …………………………………………………………………… 135 Contracting Policy …………………………………………………………………………………………… 135 Technology Innovations ………………………………………………………………………………… 135 Stationing Practices ……………………………………………………………………………………… 135 Summing Up ………………………………………………………………………………………………………………… 137 APPENDIX A, PERSTEMPO & RETENTION MODELING METHODOLOGY …………………………… 141 Modeling the PERSTEMPO and Retention Nexus …………………………… 141 Response Variable ……………………………………………………………………………………………… 142 Explanatory Variables …………………………………………………………………………………… 144 Longevity …………………………………………………………………………………………………………………… 144 PERSTEMPO Variables ………………………………………………………………………………………… 144 Marital Status and the Presence of Children ………………………… 146 Special Event Indicator Variables …………………………………………………… 147 Selective Reenlistment Bonuses …………………………………………………………… 147 Soldier Attributes …………………………………………………………………………………………… 149 Occupation and Year of Reenlistment Fixed Effects Variables …………………………………………………………………………………………………… 150 APPENDIX B, MILITARY OCCUPATIONAL SPECIALTIES …………………………………………………… 153 APPENDIX C, PERSTEMPO REGRESSION RESULTS ………………………………………………………………… 158 BIBLIOGRAPHY …………………………………………………………………………………………………………………………………………… 170 vii FIGURES Figure 1.1, March 1999 Employment Status of Wives During the Previous Year Within Traditional Civilian & Military Households …………………………………………………………………………………………………………………………………… 2 Figure 1.2, Percent of Civilian and Military Males Ages 18 to 35 Ever Married as of March 1999 ………………………………………………………………… 10 Figure 1.3, Labor Force Participation Among Wives of Civilian and Military Personnel …………………………………………………………………………………………………… 11 Figure 1.4, Percent of Male Heads of Households Ages 20 to 49 Who Moved Across County Lines Between March 1998 & 1999 …………… 12 Figure 1.5, 1992 Average Wage (U.S.=$24,481)& Median Household Income U.S.=$30,636) within the County Outside Post Main Gate ……………………………………………………………………………………………………………………………………… 13 Figure 2.1, Household Framework for