Quality Adjustment and the Excess Supply of Air Force Volunteers

ACCORDING to the "queue" concept of f1~ labor markets, wages are attached to jobs and jobs are rationed among those seeking work in accord with the employer's preferences. If the supply of labor exceeds the employer's demands, the employer will attempt to hire only the "better labor" (defined by the employer) at the established wage. On the other hand, if the employer's demand for labor equals or exceeds the available supply, all the labor will be hired, In the case of excess supply, the labor which is hired will on the average be "better" than in the case in which excess supply does not exist. Traditionally the supply curve representing all labor available to an employer assumes the homogeneity, or at least a constant average quality, of the labor. When an excess supply exists at a given wage, the employers, by being able to hire the "better labor," obtain the amount of labor demanded at a higher average quality. This amount of labor will lie to the left of the supply curve of all available labor. However, another supply curve to the left of the total supply curve, assuming a higher average quality, can be defined such that any excess supply will be just eliminated at the given wage. The market for military labor (volunteers) can be characterized precisely by the "queue" concept. Volunteers to each of the military services face a wage determined by Congress. ' Each service would like to recruit (i.e., hire) the better volunteers. Since the Army has not enjoyed an excess supply of volunteers, it has been forced to accept all volunteers above a minimum quality level and to satisfy its demands with inductees. On the other hand, the Air Force has usually had an excess supply, and hence has been able to "cream" from its better volunteers.2 Some of this excess supply can be strictly attributable to youth who want to avoid military service in the Army; rather than be drafted they enlist in the Air Force but still prefer civilian life to military life. Because the draft has affected considerably the number of volunteers to the military services, previous studies by Altman (1969), Altman and Fechter (1967), Fechter (1968), Fisher (1969), Hause and Fisher (1968), and Oi (1967), have focused on the recruiting problems of the military, specifically the Army, in a no-draft world. None of these studies, however, determined a specific supply curve for the Air Force. This may be due in part to the fact that the supply curve of Air Force volunteers is not directly observable. Data are not available on the total number of individuals who volunteer, but only on the number who are actually accepted as enlistees. So attempts to estimate supply curve parameters in traditional ways yield erroneous results. In this paper we circumvent this difficulty by developing a supply curve adjusted by the quality of the recruits and we demonstrate that this quality adjustment is an implicit equilibrating mechanism between the (short run) perfectly inelastic demand for recruits and the supply of volunteers. Under certain assumptions the parameters of the unobservable supply curve can then be inferred from the quality-adjusted supply curve. This method of incorporating a quality adjustment in estimating the supply of volunteers is applicable to virtually all labor markets. Most markets have substantial quality variations among the units supplied and not all applicants receive positions at the established Receixed for publication January 28, 1971. Revision accepted for publication November 18, 1971. * Any views expressed in this paper are those of the author. They should not be interpreted as reflecting the views of The RAND Corporation or the official opinion or policy of any of its governmental or private research sponsors. Papers are reproduced by The RAND Corporation as a courtesy to members of its staff. The paper has benefited from the helpful comments of Harrv J. Gilman, John P. White and a referee, but all errors are the sole responsibility of the author. 1 The recruiting procedures of the Air Force and the relevant institutional framework are detailed in a lengthy report on Air Force volunteers by Cook (1971). 2 The process of "creaming" involves the selecting of the better volunteers from all those available.