The Effect of Pay and Retention Bonuses on Quit Rates in the U.S. Army

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Abstract
This paper investigates the effects of pay and reenlistment bonuses on quit rates in the U.S. Army. A three stage least squares analysis of 1981 data shows that quit rates were negatively related to pay level and, even more so, to the size of the bonus offered. The effects on the quit rate were significantly greater, however, for soldiers in combat occupations than for those in noncombat occupations. The author speculates that the skills learned by combat soldiers are less marketable in the civilian labor market than the more general skills acquired by noncombat soldiers; he thus urges higher bonuses in noncombat occupations.
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