Pay Competitiveness & Quality of Department of Defense Scientists & Engineers

By Michael Gibbs

Abstract
This study examines the competitiveness of pay, and ensuing personnel outcomes, for highly skilled civilian scientists and engineers (S/Es) employed in laboratories within DoD agencies. Personnel data drawn from DoD records for the years 1982 through 1996 were used to analyze returns to skills for these employees. Little or no change in returns to skills was found for this sample, despite increasing returns to skills in the private sector over the period. This is apparently the result of the DoD's highly rigid pay structure and other personnel policies, which did not change from 1982 through 1996. The study then examines whether the DoD suffered a decline in the ability to attract, and retain, high quality S/Es during the period. No evidence is found that this was the case, even with the disparate changes in returns to skills between S/Es and comparable workers in the private sector. The study concludes that the most likely explanation is that defense workers have significant industry-specific human capital, and the private defense sector was in decline during the period.

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