Military Pay and Benefits: Key Questions and Answers

Charles A. Henning
Specialist in Military Manpower Policy

From the earliest days of the republic, America’s armed forces have been compensated by military pay, commonly known as “basic pay”. While the original pay structure was quite simple and straightforward, over time a complex system of pay, allowances, incentives, and bonuses has evolved.

With the advent of the all-volunteer force in 1973, Congress has used military pay and its associated allowances to improve recruiting, retention and the overall quality of the force. Congress, in the National Defense Authorization Act, typically authorizes military pay adjustments for the coming fiscal year. Today’s ongoing military operations in Iraq and Afghanistan, highlighted by the recent decision to increase the number of servicemembers deployed to Afghanistan, suggest that further changes in pay, allowances, incentives and bonuses will continue to receive congressional scrutiny.

In the nearly nine years since the terrorist attacks of September 11, 2001, basic pay has increased by nearly 40%. This figure does not include other increases in allowances, bonuses, or incentives. The cumulative effect is that most analysts now agree that the average annual cost per servicemember exceeds $100,000.

Many observers are currently concerned about the cost of recent manpower increases, the impact of personnel costs on the overall defense budget, and the potential decrement to equipment modernization plans caused by the increased pressure of the personnel account. To date, however, it appears that the increasing cost of personnel has not come at the expense of other elements in the defense budget.

The issue of pay comparability between military and civilian pay, commonly referred to as the “pay gap” continues to receive emphasis. Advocates for higher pay have emphasized the sacrifices being made today by the American military, the high personnel tempo and reduced dwell time, the impact on families caused by frequent deployments, and the positive impact that raises have had on recruiting and retention. Others argue that the “pay gap” is an imprecise measurement that does not fully account for other compensation increases in the form of allowances, incentives and bonuses.

The Department of Defense (DOD), on the other hand, bases its recommendations regarding military pay on its own standard for pay comparability. The DOD standard establishes that members should be compensated at the 70th percentile of wages for civilian employees with similar levels of education, age, experience and responsibility.

This report addresses the role of military pay in manning the armed forces, the types of pay increases used in the past, recent reforms in managing pay, and the role of the Employment Cost Index in determining basic pay increases. The report also reviews the compensation benefits specifically available to military personnel participating in Operation Iraqi Freedom (OIF) and Operation Enduring Freedom (OEF).

Date of Report: December 29, 2009
Number of Pages: 18
Order Number: RL33446
Price: $29.95

Document available electronically as a pdf file or in paper form.
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