The Impact of the Unemployment Rate on Attrition of First-Term Enlistees

Abstract

This study examines the effects of home-state unemployment rates on attrition behavior of Navy enlistees for successive career windows during the first term of service: the first 6 months, the second 6 months, the second year, and the third year of service. The results indicate that attrition is negatively associated with changes in the local unemployment rate during the first three career windows covering two years of service. However, after two years of service, the estimated effect of the unemployment rate becomes insignificant for most groups of sailors. This is likely because sailors with the poorest job matches are sorted out early in the first term of service.

Keywords:

• Military attrition
• Fixed effects models
• Job turnover
• Local labor markets

JEL Codes:

• J41
• J45
• J48
• J62
• J63

Notes

1 In military manpower terminology, ‘separation’ refers to enlistees who complete their contractual service obligations, but choose not to reenlist, whereas ‘attrition’ refers to new recruits who do not complete their contracts. Navy enlistment contracts vary between four and six years in length, but most contracts are four years in length.

2 For example, educational attainment is highly correlated with survival of new recruits, which is why DOD screens military applicants based on their educational credentials. Applicants with traditional high school diplomas have the lowest attrition risk and are considered the most desirable recruits (Laurence et al., 1996).

3 One estimate (Government Accountability Office, 1997) indicated that the Navy lost $126 million in recruiting and training investments in recruits who separated during the first six months of service.

4 Data retrieved from http://www.bls.gov/cps.

5 Buddin (1994) and Antel et al. (1987) have applied job matching theory to military attrition.

6 Turnover rates in the military and in civilian jobs among youth differ dramatically. The military attrition rate averages about 30% per year. By contrast, in the civilian workforce, for jobs held by young workers 18–24 years old, about 56% end within one year and about 70% end within two years (US Bureau of Labor Statistics, 2012).

7 Note that in the civilian workforce there are similar conceptual difficulties in distinguishing between quits (voluntary job mobility) and layoffs (McLaughlin, 1991).

8 The majority of new recruits are recruited during their senior year in high school. After graduation they normally spend a few months at home in the Delayed Entry Pool before they are sent to boot camp.

9 Full results from the second approach are available from the authors.

10 The GED, or General Educational Development program, involves a set of tests that certify high school-level academic skills. It is taken mostly by high school dropouts to obtain the certificate of high school equivalency (Heckman et al., 2010).

11 For example, Wenger and Hodari (2004) find that Navy recruits who do not possess a high school diploma have an early attrition rate 42% higher than those with a traditional high school diploma.

12 Reasons for receiving an advanced pay grade include, among others, completion of youth development programs such as high school JROTC, or Sea Scouts, completion of college credits or vocational school, prior military service, and referral of new recruit, to the Navy (US Navy PRIDE data base).

13 ‘Legitimate’ reasons include, among others, disability, transfer to an officer commissioning program, or transfer to the Naval Reserve.

14 Pema and Mehay (2012) find a positive relationship between completing a high school JROTC program and the military job performance of Navy recruits.

15 For an application of hazard models to military exits in the British Navy see Jaffry et al. (2010).

16 The only drawback is that MSA unemployment rates are calculated with smaller samples, so there are more movements in the unemployment rate over time due to sample size error. Measurement error is likely to be even greater for unemployment data at a more disaggregated geographic level.