MILITARY UPDATE: Experts advise Congress to offer targeted incentives instead of pay raises
Every witness before a Senate subcommittee hearing last week on military compensation — all experts on service pay and benefits — called directly or indirectly for Congress to end its 12-year run of voting for annual military pay raises that exceed wage growth in the private sector.
No witness suggested that future raises each January shouldn’t match annual wage gains for private sector workers as measured by the government Employment Cost Index.
But with personnel costs soaring to sustain a quality all-volunteer force in its ninth year of war, lawmakers like Sen. James Webb (D-Va.), chairman of the Senate Armed Services Personnel Subcommittee, are investigating ways to make military compensation overall more efficient.
Webb opened the hearing by saying that the cost of military personnel “continues to rise at disturbing rates.”
William J. Carr, deputy undersecretary of defense for military personnel policy, noted that to match civilian wage growth as measured by the ECI, the Obama administration proposes a 1.4 percent pay raise for 2011.
Service associations want that raise bumped, again by half of a percentage point, to 1.9 percent.
Webb didn’t tip his hand on what he will support. But his witnesses this day said the extra half percent in basic pay would add $350 million to personnel costs in fiscal 2011 and $2.4 billion over five years, and the benefit for recruiting and retention would be small.
A more efficient approach, senators were told, would be to add a more modest sum to reenlistment bonuses for members having job skills that the services most need.
“Unlike [basic] pay raises, bonuses do not compound from year to year or affect retirement pay and other elements of cash compensation,” said Carla Tighe Murray, a senior analyst for the Congressional Budget Office.
Carr noted that the extra $350 million some lawmakers want to pump into basic pay in January could be used instead to pay $30,000 bonuses to 11,000 more personnel with critically needed skills.
Congress has been backing basic pay raises above the ECI for the past decade to narrow a perceived gap with private sector pay.
But Murray said the pay gap no longer exists if pay comparisons take into account gains in military allowances over a decade.
“Using a broader measure, one that includes housing and subsistence allowances, indicates that the cumulative increase in military compensation has exceeded the cumulative increase in civilian wages and salaries by 11 percent since 1982,” Murray testified. “That comparison does not include non-cash and deferred compensation which would probably add to the cumulative difference” to service members’ favor.
Brenda S. Farrell, the Government Accountability Office’s director for defense capabilities and management, led a team of analysts that reported to Congress last month on the adequacy of military compensation.
Farrell testified that service pay and benefits now “are generous” compared with compensation packages offered in the private sector.
She added that across-the-board pay raises “may not be seen as the most efficient recruiting and retention mechanism.” She called targeted bonuses “more appropriate” to keep sufficient personnel in critical skills.
The GAO had reviewed recent military compensation studies by the CBO, RAND and the Center for Naval Analyses.
Farrell said comparing military and civilian compensation is always a challenge, given the unique factors of service life and the difficulty of comparing benefits like health care or deferred compensation like retirement.
But the GAO agreed that the Department of Defense should begin to weigh the value of retirement and health care compensation in making pay comparisons with other Americans.
On this point, DoD’s Carr disagreed, saying military people have become accustomed to comparing Regular Military Compensation — basic pay, housing and food allowances plus the federal tax advantage on those tax-free allowances — with civilian wages.
RMC now exceeds wage levels for 70 percent of civilian workers of similar age and work experience.
But Farrell said defining and comparing military compensation more broadly could help recruiting and retention. When this yardstick is used, military compensation today exceeds compensation packages for 80 percent of peers in the U.S. work force.
James Hosek, a RAND expert on military pay, suggested that with unemployment high and the economy climbing out of a deep recession, Congress should feel comfortable having the services rely more heavily on targeted incentives rather than an enhanced across-the-board January raise.
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