You won’t find a single member of the military, of course, who thinks that they’re overpaid, but according to some federal mandates, they might be.
The Congressional Budget Office released a report Friday with some alternative approaches to setting military basic pay, ones that would slow the rapid growth pay scales have been seeing in recent years.
One would be creating a different cost index, though CBO found that their in-house test model didn’t really differ much from the Employment Cost Index year-over-year. Another, more impactful option, would be to use the ECI on the full complement of military compensation: not just basic pay, but the basic allowance for subsistence and the basic allowance for housing.
That way, those substantial expenses in addition to basic pay would be more standardized, and grow in proportion to each other. The Bureau of Labor Statistics creates the index yearly, averaging the growth of wages over the previous year.
“If applied in the future, it could slightly slow the growth in spending for regular cash pay and associated expenses. In 2030, it could reduce annual costs by roughly $3 billion (or 1.7 percent),” according to the report. “But other costs, such as special and incentive pays to address any recruiting and retention problems that might arise, could erode some of the savings.”
Researchers have been looking into the possibly of shaving some costs in the personnel realm, because while the defense budget makes the most headlines with its big acquisition programs, it’s actually people who the services spend the most money on ― about a quarter of the $740 billion-plus yearly allowance.
Technically, service member pay is supposed stay apace with the federal employment cost index. Law mandates that the basic pay scale be adjusted yearly with the ECI as a guide.
The traditional benchmark has been to stay in the 70th percentile, so that troops are earning more than about 70 percent of civilian wage earners with similar skills and experience. That level is meant to make military service attractive enough to prospective recruits without spending more money than would be necessary to man the services appropriately.
But the data show that the current levels have been at about 90 percent for enlisted troops and 83 percent for officers, for over a decade. The conclusion could go one of two ways: either troops are overpaid, or the 70th percentile benchmark is wrong.
The biggest concern about making changes, per the CBO report, would be the possible effects on recruiting and retention.
For an 18-year-old high school graduate with no work experience or higher education, E-1 pay and benefits aren’t half bad. Same for a freshly commissioned O-1, who likely had their bachelors degrees paid for by their service. But it’s a delicate balance, setting pay rates to be competitive but not overly so.
“As the pay of service members has increased relative to civilian pay in past years, the share of recruits that DoD considers high quality has also risen substantially and exceeds its goals,” according to the report. “The opposite would probably happen if pay for service members slowed significantly relative to civilian pay.”
The growth would likely slow by only 0.1 percent, the report continues, but the effect of that is unknowable at this point. To counteract any negative effects, DoD may have to use incentive pays to recruit for certain jobs and retain certain ranks. That might make more sense than trying to keep basic pay attractive, according to CBO.
“Targeted pay has been more cost-effective than across-the-board increases, and any decline in savings would probably be smaller if DoD used those force management tools rather than across-the-board pay raises,” according to the report.”
Meghann Myers is the Pentagon bureau chief at Military Times. She covers operations, policy, personnel, leadership and other issues affecting service members. Follow on Twitter @Meghann_MT