Study Shows Troops Paid Fairly but Differently

March 25, 2008
It is one of the most politically sensitive questions on Capitol Hill: Are the troops getting paid the right amount?
A new Defense Department study suggests that the answer is yes, when basic pay, cash allowances, free health care, pensions and tax breaks are taken into consideration.

When those elements are combined, military officers and enlisted personnel are compensated as well or better than 80 percent of their counterparts in the private sector of similar ages and educations, the study said.

That runs contrary to popular perceptions, shaped in the late 1970s, when military pay fell behind private-sector wages, and reinforced in the early 1990s by reports that several thousand military families relied on food stamps to make ends meet.

Congress became concerned about such perceptions and realized that pay comparable with the private sector is critical to maintaining an all-volunteer force, so it began pumping up military salaries.

Over the past decade, Congress usually has set military pay raises at one-half of a percentage point above the average annual private-sector wage increase. Since 2001, the Pentagon calculates, average basic pay has grown by 32 percent.

But there is more to military compensation than pay, and the Pentagon’s study, released this month, emphasizes the importance of benefits — a departure from previous pay studies, known as quadrennial reviews of military compensation.

The study was headed by Jan D. “Denny” Eakle, a retired brigadier general who served for 29 years in the Air Force. When she retired, she was deputy director of the Defense Finance and Accounting Service, which is responsible for paying more than 5 million people.

One of the study’s goals is to help educate military personnel about compensation so that they better understand what kind of income they will need to maintain their standard of living if they leave the armed forces, Eakle said in an interview.

The study begins with regular military compensation — basic pay, housing and food allowances and an estimate of the federal income tax advantage gained by receiving tax-free allowances. It then adds an estimated value for the free health care received by the military, the value of retirement benefits and additional savings for being able to avoid state and Social Security taxes.

“Military members who focus solely on cash compensation will tend to systematically undervalue the compensation package they receive,” the study said.

For example, an officer who is a college graduate with four years of service and who decides to leave the military will need to carefully review job offers, Eakle said.



In 2006, that officer would have had an income of $66,000 in pay and non-taxable cash allowances. The officer would need to earn at least $72,000

 in the private sector “in order to have the same take-home pay,” she said.

“Virtually every private-sector company, if it offers benefits, makes sure people understand what the benefits are worth,” Eakle said. “In the Department of Defense, we have not done that very well, if at all.”The study recommends that the Pentagon adopt the more comprehensive approach to measuring military compensation. But the troops may be skeptical of the idea.

Cindy Williams, a research scientist in the security studies program at the Massachusetts Institute of Technology, said the department already provides members of the armed forces with an annual explanation of their compensation. But, she noted, “I have heard military families refer to that as the ‘lie sheet.’ ”

“The fact is that the structure of military pay is so different from the structure of pay in the private sector, that it is very difficult for people serving in the military to understand just what their pay is,” Williams said.

Steven P. Strobridge, director of government relations at the Military Officers Association of America, agreed that the annual compensation statement “upsets military people,” especially those who are repeatedly deployed overseas and feel they are making sacrifices, financially and emotionally.

“When anyone says we need to educate people on what a good deal they have, you have to be careful,” he said.

The association prefers that Congress stick with its practice of providing annual raises that slowly but steadily narrow the difference in military and private-sector average wages, rather than “fuzz the issues” by assigning values to military benefits, Strobridge said.

Based on the Labor Department’s employment cost index for measuring wage growth, he said that military personnel would need a 6.8 percent pay raise next year to catch up with the private sector.

The White House has proposed a 3.4 percent military pay raise in 2009, but Rep. Gus Bilirakis (R-Fla.) has introduced a bill calling for 3.9 percent. Key House leaders have signaled that they want to provide more than what the White House requested but have not said how much more.

Eakle said the study shows, however, that any debate should not be about a pay gap and whether it exists. “That is really not looking at the big picture,” she said. “It’s not about pay comparability as much as being able to do a true comparison to the private sector.”

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