The All-Volunteer Army at 50 – Does Milton Friedman's Case Still Make Sense?

On July 1, 1973, America instituted the All-Volunteer Force, capping off a tumultuous decade of debate and ending the longest uninterrupted period of conscription (23 years) in our nation’s history.  The transformation was a triumph particularly for 1976 Nobel Prize-winning economist Milton Friedman, whose analytical arguments and towering intellectual presence on President Nixon’s Gates Commission surmounted the significant institutional inertia favoring the status quo. But, as the military, and Army particularly, wrestles with the most severe recruiting shortfall over the past fifty years, is it now time to re-look Friedman’s underlying assumptions and the state of volunteer military service, especially in light of the existential military threats from peer competitors like China and Russia?

The Selective Service Act, passed four days after the U.S. entered WWI in 1917, helped prevent the riots and bounties common during earlier drafts by using a lottery system that was viewed as more equitable.  When the draft endured after the Korean Armistice in 1953, opposition was low, as some 90% of men received deferments. The House of Representatives even voted 387-3 to extend the authority as late as 1963.  Multiple Federal entities studied the issue during the 1960’s, all concluding that an all-volunteer force was infeasible. However, opposition was building.

When Milton Friedman published his book Capitalism and Freedom in 1962, the case for an all-volunteer Army based on economic principles was a radical idea. Up until this time, other social scientists such as psychologists and sociologists exercised authority over military personnel issues. Under the framework of rational choice theory, Friedman’s arguments for the all-volunteer force generally followed three lines of reasoning: it was immoral to conscript men in a free society, the full economic cost of conscription, especially on the middle class, was greater than the benefit, and the constant turnover of conscripts made it difficult to inculcate the skills and professionalism necessary for a technologically advancing military. Friedman noted that men were making sub-optimal choices, like enrolling college or getting married, solely to avoid the draft. As the intellectual leader of President Nixon’s Gates commission, Friedman’s arguments ultimately won out, with the all-volunteer force, signed into law to take effect starting with fiscal year 1973. 

The compensation impacts were profound, with annual pay and housing compensation (in current dollars) of new private jumping 80% from $2,444 in 1971 to $4,406 in 1973, not including bonuses that reached as high as $2,500. Men’s overall mean income at time, only rose by 18% ($7,892 to $9,289) from 1971 to 1973. During the final six months that the draft was in force (January-July 1973), volunteers were sufficient such that no draft call-ups were even required.

The model Friedman envisioned has endured, more or less, for the past 50 years. Just prior to his death in 2006, Friedman lamented in an interview with economist Russ Roberts that the all-volunteer Army was the only radical idea he was able to decisively achieve from his original 1962 book. What’s gone wrong?

From a pure numbers perspective, achieving an all-volunteer force should be easier today.  The accessions mission in 1973 aimed to fill a 1.4 million person Army, including 801,000 on active duty. The 2023 Army is only 954,000, with 452,000 on active duty. The population of 18-29 year olds is 30% larger today (52 million) than 50 years ago (41 million). There are more high school graduates today, women are 17% of the force versus 2% in 1973, and more jobs are open to them. However, it is true that a much higher percentage of youth don’t qualify for military service due to physical or mental health problems.  

Spending on direct compensation and quality of life amenities is also better. Though a somewhat simplistic measure, a new enlisted soldiers’ pay and housing in 1973 was roughly 47% of men’s mean income in 1973, versus 52% of men and 80% of women’s mean income in 2021. This does not include large bonuses, improved food stipends, and highly subsidized medical care. The military continues to match large civilian employers with benefits such as generous paternal leave, sabbaticals, tuition assistance, and other policies.

It is a mistake to think that based on these facts, Friedman’s economic analysis is irrelevant today. His framework for this analysis still holds, it just requires a holistic view of what economists refer to as aggregate utility functions. Essentially, this means accounting for more than compensation and quality of life improvements, and quantifying cultural differences between the values of Millennials and Gen Z as compared to Baby Boomers and Gen X, which may pose unique problems for an institution like the Army, whose core mission requires sacrifice and risk. 

The values and perceptions of today’s youth are a challenge for the Army, whose own polling shows they have a disproportionate perception of being injured, killed, suffering from post-traumatic stress disorder (PTSD) or for women, being sexually harassed or assaulted. According to a recent Wall Street Journal poll, far fewer today believe patriotism is important (23%) than those in 1998 (70%).  Today’s military-age adults value flexibility, self-expression, and individual identity.  These types of variables are rolled up into the difficult-to-quantify “propensity to join” statistic. How does one place a monetary value on concepts as nebulous as “patriotism” or design bonuses large enough to overcome these obstacles?

In all likelihood, there is nearly no amount of money that can convince an 18-year old man or woman that they should sacrifice their life for liberty, freedom, and the good of their country. The desire to serve must spring from a deeper metaphysical feeling that transcends monetary compensation. Placing too much emphasis on the financial benefits of joining military may actually dissuade some recruits who see the “service” aspect reduced to a purely fiscal transaction. Money can’t buy “meaning.”

Trying to overcome these dissuading factors with monetary compensation is proving to be expensive.  According to budgetary figures released by the DOD – especially in the Army - pay, benefits, and quality of life spending in military are a growing share of the budget. Does our Federal budget, with $31T of debt, have the capacity to continue with an all-volunteer force that may necessitate vastly higher overall compensation to meet the needs of our national defense while maintaining our technological edge? 

It’s important to recognize that Friedman himself noted that an all-volunteer force was untenable in a total war situation, which is possible in today’s geopolitical environment. Barring a dramatic shift in societal perceptions toward patriotism and service, the military is left with only difficult options that the Gates Commission never needed to consider.

Everything must be on the table. Senior leaders may have to re-think the types of jobs that can be performed by civilians and contractors as well as between officers, warrant officers, and enlisted personnel. We may need a smaller, more highly-compensated active force with larger reserve forces. The military may need the authority and ability to shift uniformed personnel between civilian and military jobs at certain ranks, and to leverage technological advances to reduce overall force size. These are the factors that Friedman’s analysis, properly adjusted to account for today’s cultural milieu, can help answer.

As the perceived gap between civilian and military values grows wider, and civil society becomes more polarized between right and left, the military will have to wrestle with how to maintain the time-tested culture necessary to defend the nation while still attracting enough people willing to preserve and defend the idea of “America.” Because, if we can’t even agree on that, no amount of spending on national defense will be adequate to convince today’s citizenry that sacrificing their life for their country is worth the cost. 

Colonel Michael Mai is the Deputy Chief of Staff, G8, at U.S. Army Space and Missile Defense Command (USASMDC). His is a 2020 distinguished honor graduate of the Eisenhower School for National Security and Resource Strategy. These opinions are his own and do not represent the views of the USASMDC or the Army.