Optimal Long-Run Talent Management of the Department of Defense Acquisition Workforce in Response to COVID-19: A Dynamic Programming Approach

Abstract

As the economic impact of the COVID-19 pandemic lingers, with the speed of recovery still uncertain, the state of the civilian labor market will impact the public sector. Specifically, the relatively stable and insulated jobs in the Department of Defense (DoD) are expected to be perceived as more attractive for the near future. This implies changes in DoD worker quit behavior that present both a challenge and an opportunity for the DoD leadership in retaining high-quality, experienced talent. We use a unique panel dataset of DoD civilian acquisition area workers and a dynamic programming approach to simulate the impact of the pandemic on worker retention rates under a variety of recovery scenarios. We find that workers will choose not to exit from the DoD while the civilian sector suffers from the impact of the pandemic. This allows leadership to more easily retain experienced workers. However, once the civilian sector has recovered enough, these same workers will quit at an accelerated rate, making gains in talent only temporary. These results imply that while the DoD can take short-run advantage of negative shocks to the civilian sector to retain and attract high quality workers, long-run retention will be achieved through more fundamental reforms to personnel policy to make DoD jobs more attractive, no matter the state of the civilian labor market.As the economic impact of the COVID-19 pandemic lingers, with the speed of recovery still uncertain, the state of the civilian labor market will impact the public sector. Specifically, the relatively stable and insulated jobs in the Department of Defense (DoD) are expected to be perceived as more attractive for the near future. This implies changes in DoD worker quit behavior that present both a challenge and an opportunity for the DoD leadership in retaining high-quality, experienced talent. We use a unique panel dataset of DoD civilian acquisition area workers and a dynamic programming approach to simulate the impact of the pandemic on worker retention rates under a variety of recovery scenarios. We find that workers will choose not to exit from the DoD while the civilian sector suffers from the impact of the pandemic. This allows leadership to more easily retain experienced workers. However, once the civilian sector has recovered enough, these same workers will quit at an accelerated rate, making gains in talent only temporary. These results imply that while the DoD can take short-run advantage of negative shocks to the civilian sector to retain and attract high quality workers, long-run retention will be achieved through more fundamental reforms to personnel policy to make DoD jobs more attractive, no matter the state of the civilian labor market.