Pay Parity Act: The Just, Cost Effective Way to Improve Retention and Readiness

By James Rae

For close to 50 years, reservists have received pro-rated incentive pay despite having to maintain the same proficiency level and achieve the same performance requirements as their active duty peers. 

The 2022 National Defense Authorization Act (NDAA) instructs the Secretary of Defense to submit a report to Congress that determines the cost of providing reserve component (RC) service members full incentive pay and to certify that such implementation shall not have a detrimental effect on a services force structure or recruiting and retention. The time has arrived to correct thispastwrong and pay reserviststhe same amount for performing the same work as their active component counterparts. Equal incentive pay will reduce total per service member cost, improve retention, readiness and the safety margin, and make available badly needed resources to fund necessary modernization efforts. 

Background

In the aftermath of the Vietnam conflict and in response to high aviator attrition rate, Congress passed, in 1974,the Aviation Career Incentive Act. Legislation intent was to offer additional compensation to attract and retain qualified aviation professionals, as well as to recognize the duty’shazardous nature and to incentivize service members to maintain the highest proficiency level in a demanding career field. Although Aviation Incentive Pay (AvIP, aka “Flight Pay”) is perhaps the best known, several occupations are eligible to receive incentive pay. All reserve component service members that perform duties as pilots, crew chiefs, parachutists (“jump pay”), explosive demolition and a host of other duties covered in Title 37 U.S.C §301 are eligible to receive 1/30th of a month’s incentive pay for each drill period performed.

Present Day

In the more than two decades since 9/11the reserve components have maintained an unprecedented OPTEMPO. Several National Guard units have executed four or more nine-month or longer deployments toAfghanistan, Iraq or otherhazardousoperational areas.Individual reservists in certain occupations (e.g., aviation)may have spent more than four years deployed to these same hotspotsin the last 20 yearsSeeing that a sizable percentage of force structure resides in our reserve components (more than 50% of the Army’s force structure resides in the National Guard or Army Reserve),future success in executing our national security strategy will require our reserve components maintain tactical excellence and the highest operational readiness level.Fractional pay in an amount that may not even cover the cost of the tank of gas required to get to their weekend drill (fractional pay can be as low as $30 a month) is not enough incentive to convince a talented professional to put forward the effort necessary to maintain proficiency at a demanding, risk intensive task.

Cost Effective

Despite cost increase per service member, equal incentive pay for reservists actually decreases the taxpayer bill. Using the Army’s largest incentive pay cohort as an example, it takes approximately one year and costs about $1.3M (exact time and cost varies per assigned aircraft) for the Army to train and graduate an aviator from the Initial Entry Rotary Wing (IERW, or “flight school”) course. For a new aviator to develop the proficiencynecessary to execute a missionand then the competency to serve as an aircraft Pilot-in-Command or attend required specialized “track” designation (e.g., Instructor Pilot)training, the cost increases to more than $10M and the development time commonly exceeds three years. Due to this high aviator training cost, a RAND study determined that per capita cost actually declines as incentive pay increases.This same dynamic exists for all career fieldsthat receive incentive paySeeing thatthe cost to train service members in specialized skill sets far exceeds incentive pay cost, the military’s pennywise approach has proven pound-foolish. The sooner the DoD institutes equal incentive pay for reservists, the sooner our congressional appropriators will have additional funding available to spend on badly needed modernization efforts

Improved Retention

The military’s approach to motivate skilled professionals to remain in its ranks isnot working. As of the end of FY21, the Air Force was about 1,500 pilots shortof its authorized strength.In failing to reach their pilot end strength goal, the Air Force was not alone.According to a 2019 Congressional report, all services are short pilots in their operational rotary-wing units, fixed-wing units, or both.These shortfall figures are all prior to commercial aviation reaching its projected peak-hiring window that will start this year and continue for much of thisdecade. This raises the question that if each service is unable to retain its aviators prior to the projected commercial aviation-hiringsurge, why would using the same approach that has never worked before result in anything other than the same end strength shortfalls and readinessconcerns?

In an effort to improve readiness and meet its end strength goals, the Armyrecently decided to extend the initial service obligation for all pilots that start flight school on or after 1 OCT 2020from six years to 10. Unfortunately, this effort is unlikely to address the Army’s aviator retention issue in either the short or long-term.Seeing that 25% of senior aviation warrant officers in the active component are retirement eligible,with that number increasing to 40% for the same cohort in the Army National Guard, this recent Army retention effort neither applies to nor offers additional incentive for the most senior and capable aviators to remain in its ranks.Since most, if not all, of these aviators have spent years in war zones, time-honored patriotic appeals to ignore perceived material and quality of life gains and remain in uniform are unlikely toconvince them to stayEven once the extension does take effect for all aviators in the 2030s, the military’s 2018 decision to move to a Blended Retirement System may have an unintended negative retention impact past initial obligation. The reduced retirement pay upon reaching 20 years of service (from 2.5% per year of service to 2%) combined with an increased retirement benefit they take with them if they leave with less than 20 years(401k match of up to 5%), may fail toprovide the financial incentive for service members to stay past their initial commitment. The historic and powerful financial motivation to make sure you stay in long enough to get your pension may no longer be more attractive financially then getting out and starting their commercial aviation careers at a younger age. 

The concern that pay parity will lead to an active component exodus is unfounded, even though pay parity for reservists is equitable and will make serving in the reserve components more attractive.An active component service member receives base pay, housing (BAH) and subsistence (BAS) allowances, and incentive pay. A reservist only receives fractional base pay for each day served plus incentive payEven accounting for pay parity, a reservist CW3 army aviator would receive as little as 20% of the monthly pay received by their active duty counterpart. Voluntarily taking as much as an 80% pay cut is not an attractive career option and one that few skilled professionals will take solely to transition to a reserve component. The additional pay may, however, prove very attractive to a transitioning service member who wants to supplement their second career with a secure paycheck while continuing to serve.

The same financial incentive pay parity provides transitioning active component service members applies to reservists. At the current fractional rate, incentive pay is not adequate compensation for the time required to maintain proficiency, commute expense incurred, or the time spent away from family.  The additional hundreds of dollars a month provided by pay parity, complemented by existing benefits (health care, retirement eligibility, additional income stream not vulnerable to economic forces), will combine to produce a case so compelling that few reservists will leave prior to earning at least 20 years of service.The subsequent reduction in training costs from assessing fewer service members will more than make up for the monthly stipend increase provided to these highly skilled, long-tenured reservists.

Readiness and Safety Margin Improvement

In addition to cost and retention benefits, pay parity also improves readiness and increases the safety margin. Readiness improves from highly skilled professionals remaining in our ranks longer. This reduced churn helps in two ways: it lowers the schoolhouse quota output required to man our units, and reduces the mission training burden on our operational units. The same dynamic increases the safety margin. Whether the mission involves flying an aircraft or a techniciandisposing ordinance, safe operationis more likely when an experienced hand is executing the task. 

Reservists have been denied full incentive pay too longfor performing the same work as their active duty peers. Our leadership has the opportunity to correct this inequity. Enacting pay parity is the solution to our decades-long retention issues that also improves readiness, increasesthe safety margin all while handing the taxpayer a smaller bill. Here’s to our reserve service members receiving equitable pay starting as soon as next fiscal year.  

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