Considering the Chinese Air Force's Best Response

RAND released a report on the Chinese People's Liberation Army (PLA) asserting that "the main driver for Chinese military aerospace power development is the PLA's view that it needs to be prepared to deter and, if necessary, defeat the United States in a high-end clash." And, it states that the Chinese Air Force is closely following U.S. Air Force capabilities and copying or innovating in areas necessary to accomplish its objectives.

The author recommends that the U.S. Air Force should respond by monitoring advancements in Chinese military aerospace capability so it can exploit weaknesses and avoid further capability transfers. These are reasonable suggestions, but the U.S. should also consider how its own behavior may be encouraging Chinese military development.

If the Chinese are truly focused on developing their capability to compete with the U.S., it may be possible to reduce the impetus for additional Chinese military build-up by decreasing the negative rhetoric and providing less overt demonstrations of U.S. capability. The Chinese are responding to U.S. efforts to maintain Command of the Commons. In turn, the U.S. observes the increase in Chinese military capability and responds with additional investment that the Chinese then copy. We find ourselves in a tit for tat scenario of escalating responses. So, rather than overtly label China as a military threat which encourages further Chinese military modernization, the U.S. could preserve the effectiveness of its current capabilities by considering the best response of those concerned with U.S. military advantages. This is especially important at a time when the U.S. is already facing significant national security challenges.

"If you find yourself in a hole, stop digging."
—Will Rogers

Cultural Norms vs. Market Norms →

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U.S. Air Force 934th Airlift Wing leaders salute Airmen as their aircraft taxis on the runway for takeoff. (U.S. Air Force Photo by Tech Sgt. Bob Sommer)

The Air Force has replaced its cultural norms with market norms. And, it cannot compete with the airlines' market power.

Getting back to commitment

In watching the testimony on the pilot crisis, I noted that the Marines do not rely on bonus payments to the same extent as other services. The Air Force has paid a $25K annual bonus for decades that they would like to increase to $35K. In contrast, the Marines haven't offered a bonus since 2011 and plan to offer a temporary, targeted bonus to address its pilot retention concerns.

I recently participated in a conversation about pilot retention during which I learned that a pilot who leaves the service after their initial service commitment and flies for the airlines will make $1.3 million more than if they stayed in the Air Force until 20 years and then began a flying career. I have not verified this number; but, clearly, the Air Force cannot pay pilots a $1.3 million bonus.

After the conversation, I re-read Dan Ariely's book Payoff in which he addresses the long-term effect that bonuses have on worker behavior.

“The bonus, however, would put a numerical value on something that wasn’t countable to begin with: your commitment”

It seems the Marines understood long ago that commitment was not something they were willing to sacrifice by offering extrinsic rewards. They would rather see those who lack commitment leave. Now that the Air Force has established a bonus, pilots have come to expect these payments. Even when the airlines have been in periods of decline, the Air Force has been unable to curtail bonuses. Why? Perhaps, they are in a predicament where they cannot restore intrinsic rewards that build commitment. If this is the case, how does an organization shift from the transactional relationships that bonuses foment and return to a reward mechanism that builds commitment?

Blended Retirement System May Exacerbate Air Force Pilot Shortage

The Air Force is falling short of its goal of retaining 65 percent of its pilots beyond their 10 year active duty service commitment (ADSC). The Blended Retirement System (BRS) may worsen the problem. Under the previous retirement system, pilots who left before reaching 20 years of service did not receive any retirement benefits. The new system establishes a 401k-style Thrift Savings Plan (TSP) account where DoD matches up to five percent of a member's salary. By the time pilots reach 11 years of service, the value of the match will grow to $47,500. Pilots no longer have to remain in service (or transfer to the Guard or Reserve) to complete 20 years of vesting. They can leave and keep their TSP account.

The new system recognizes that mid-service retention could be challenging, so it allows the services to offer continuation pay up to 13 times regular monthly pay when members reach 12 years of service. This is in exchange for four addtional years of service. Presumably, once members reach their 16th year, they are more likely to remain until retirement. The maximum continuation pay is currently $86,764.

This may not be sufficient to retain pilots (and others) who have high opportunity cost of continued service. Many are forgoing $25,000 annual bonuses to begin careers in commercial aviation. And, because airlines rely extensively on seniority to allocate privileges, pilots who plan to leave service prefer to do so earlier in their careers. Because it costs between $10-20 million to create an experienced pilot, the Air Force needs to increase compensation or otherwise induce its pilots to stay.

Air Force's Fundamental Problem →

As Gen (ret.) Larry Spencer writes in a recent Op-Ed, the Air Force faces the fundamental problem of economics: scarcity (PDF link). He asks:

How does the nation exploit the Air Force’s wide array of options, and satisfy the unlimited demands for Air Force capabilities with increasingly scarce resources that are allocated to the Air Force?

He contends the solution is to convince elected leaders to provide more resources. As it turns out, all of government faces the fundamental problem and, next year, a continuing resolution is likely. So, a more tenable approach is for the Air Force to optimize under its current budget constraint. This involves making informed decisions. The service should invest in clearly understanding marginal costs and benefits across its portfolio.