Estimated cost of conscription

A frequent pro-conscription argument that I keep hearing in Greece relates to its cost. Maintaining a 100% professional army is probably too expensive, practically a non-consideration given the austerity measures that the government is taking ever since the IMF saved the country.

Which is more or less non-true. Conscription costs, and a lot of money for that matter. First of all there is a direct cost:
1. It costs approximately 300€ per conscript per month (link in Greek) or circa 100M€ per annum assuming 40,000 conscripts per year that serve for 9 months.
2. It costs up to the same amount per month to the conscript’s family, probably amounting to another 50M€.

Then there is a major and much larger opportunity cost. Most people in Greece and most pro-draft supporters around the world have a tendency to ignore this, which is kind of strange. It’s like claiming that the cost of a car accident, where 4 passengers of a Hyundai i30 get seriously injured for months when hitting a wall, amounts to circa 10,000€, that is the cost of the car plus any minor repairs to the wall. I mean who cares that 4 people got seriously injured?

So how much is the opportunity cost of 1 conscript that has to more or less cease working to serve the army? While there are surprisingly few articles on the matter it makes sense to assume it’s similar to the cost of someone that got seriously injured in a car accident and had to stop working. Mr. Dimitris Liakopoulos has done a good job of quantifying this cost in his Diploma Thesis. By making certain extra admissions, namely that:

  1. The conscripts employment ratio is just 50%
  2. Prices quoted are adjusted by +50% to take into account inflation between 1999 and 2010
  3. A conscript has to cease working for 12 months instead of just 9 (cf. footnote 4, page 2 of The Dynamic Cost of the Draft)

It adds up to an additional sunk opportunity (lost productivity) cost of circa 14.150€ per conscript or circa 565M€ per year. And while this doesn’t directly impact the balance sheets, it does have a measurable impact on the GDP.

And this is not it. At least a couple of different sources claim that the wage of a civilian that has been a conscript vs. one that hasn’t is circa 5% in the long run (this is due to the importance of early professional training). Assuming a ratio of Greek men that have served of 3:1 vs. those that haven’t, this provides for a 5% wage impact for almost 2 million individual. Given the average wages this is almost 1.000€ per annum or 2 billion!

The above raise the conscription cost (direct + opportunity) to almost 2.5 billion euros, or almost 1% of the Greece GDP. Which is close to the 1.5% predicted by the strict mathematical model presented in “The Dynamic Cost of the Draft” paper (Page 12, Table 2, 50% subject to draft, 100% supplementary tax rate).

This doesn’t take into account extra hidden costs, such as employment costs (for military personnel dealing with conscription), retraining cost (not applicable in a professional army), procedural cost (access to what is perceived cheap labor leads to huge spending inefficiencies, at least in the Greek army). That said it should convince any reasonable person that conscription is not free and it may actually be worth spending half a billion dollars per annum to fully professionalize the Greek Army rather than wasting the time of its youth.


Tags: , , , ,

2 Responses to “Estimated cost of conscription”

  1. Nikos Says:

    Why Not a Volunteer Army?

  2. BBC- Greek parents too poor to take care of their children - Page 7 Says:

    […] […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: