Inferring the value of short-staffed public sector jobs: Federal budgets and military fighter pilots

Abstract

This study uses a novel framework based on the “negotiated staffing equilibrium” between governmental agencies and governing bodies to estimate the net benefits of increasing employment in public sector occupations that experience chronic labor shortages. The marginal values of these labor inputs, as perceived by the parties during budget negotiations, are inferred from information on the cost and productivity of labor in short supply compared to those values at the funded equilibrium employment level. If labor is not in short supply, then the net marginal benefits are either zero or negative. This model can be parameterized by elasticities and informed by principles of derived demand. The example of U.S. Air Force fighter pilots is used to illustrate the methodology because this occupation has frequently been understaffed, and the benefits of military staffing have generally been assumed to be intractable to value. The estimates here of the annual marginal net benefit of these fighter pilots is about $1.02 million, based on pilot shortages as of 2017. Eliminating that shortage would yield $458 million in additional net benefits. The results from estimating this model can inform labor allocations, budget debates and provide input values for decision-making tools such as benefit-cost analyses.