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March 15, 2008 Military Update
By Tom Philpott
A new Department of Defense study of military compensation finds no pay gap exists today between servicemembers and civilian peers.
But the study, conducted over the last two years, advises Defense leaders to adopt a new tool for comparing military and private sector compensation so that service members learn to appreciate the full value of their more favorable package of pay, benefits, allowances and tax breaks.
The study of the 10th Quadrennial Review of Military Compensation (QRMC) also calls for changes to key elements of cash compensation:
*Basic Allowance for Housing (BAH) paid to members without dependents living off base in stateside areas should be raised, as budgets permit, so that over time their BAH covers the full cost of rent and utilities for housing comparable to units rented by civilian peers.
Defense pay officials began to close this single members BAH gap, uncovered by the QRMC, when in January it established a BAH “floor” for members without dependents to be no less than 75 percent of BAH for members with dependents. But single BAH will need to reach 95 percent of the with-dependents rate before unmarried members no longer face out-of-pocket costs to rent housing of similar size and quality to civilian peers.
*Partial BAH paid to single members living in barracks or aboard ship should be raised and made variable, based on the type of quarters they live in. The new maximum rate should equal 25 percent of full BAH and be paid to sailors who must alternate bunk time, called “hot bunking,” aboard attack submarines. Current partial BAH, set at $7 to $19 a month for enlisted, would end for single members living in “one-plus-one” quarters, the equivalent of a two-bedroom apartment shared with one other member.
*New Constructive Credit authority would allow the services to raise permanently the basic pay of members advanced ahead of their peers. This would be done by assuming, for pay purposes only, that top performers entered service a year earlier than they did so that they would reach longevity steps built into the military pay table sooner than peers. The same authority could be used to make more competitive pay offers to physicians.
By law, the president must direct a review of military compensation every four years. These recommendations are from volume one of a two-volume 10th QRMC report. Volume one looks at needed changes to cash compensation. Volume two, to be released in late summer, will make recommendations on qualify of life, retirement and health benefits.
Defense officials will study the recommendations and decide what changes the administration wants to embrace, seek new legislative authority where needed to make compensation more flexible or efficient.
Jan “Denny” Eakle, a retired Air Force brigadier general and former deputy director of the Defense Finance and Accounting Service, has served as 10th QRMC director since it began work in February 2006.
In an interview she said “it’s a bit disingenuous” to still refer to a 3.5 percent pay gap today between the military and private sector, based on wage growth since 1981 when officials declared military pay had reached “comparability” with private sector civilians.
Military people need a new tool to recognize the “real value” of their pay and benefits, she said. The yardstick now used is Regular Military Compensation. RMC combines basic pay, housing allowance, food allowance plus an estimated value to the federal income tax advantage that servicemembers enjoy as a result of their tax-free allowances.
The 10th QRMC recommends replacing RMC with Military Annual Compensation or MAC. In addition to the four RMC elements, MAC would include the estimated value of out-of-pocket health costs avoided because of military health care. It also would assign a value to military retirement for members entering the career force and value additional tax breaks on military allowances tied to social security taxes and state taxes avoided.
MAC then would add between $4,300 to and $16,100 to the value of enlisted member compensation and between $4,100 to and $30,000 to officer compensation, Eakle said, when comparing military pay and benefit values to the private sector.
If Defense leaders chose to adopt MAC, Eakle said, pay comparability should be declared when MAC reaches or exceeds the 80th percentile of compensation for civilians of the same age and education level. She said MAC for both officers and enlisted members does exceed that 80th percentile.
Asked if MAC would serve to hold down future military pay raises, Eakle said basic pay adjustments will continue to be tied, by law, to annual private sector wage growth. But servicemembers should begin to see more clearly the relative value of their compensation elements.
“Our intent is to have a better measure to compare two individuals — one wearing the uniform, one in the private sector — and say, ‘What would this member have to make, were he a civilian, to be at the same standard of living,’” Eakle said. She later added, “We need to educate the force on what the real value of their compensation is.”
March 15, 2008 Military Update
By Tom Philpott
A new Department of Defense study of military compensation finds no pay gap exists today between servicemembers and civilian peers.
But the study, conducted over the last two years, advises Defense leaders to adopt a new tool for comparing military and private sector compensation so that service members learn to appreciate the full value of their more favorable package of pay, benefits, allowances and tax breaks.
The study of the 10th Quadrennial Review of Military Compensation (QRMC) also calls for changes to key elements of cash compensation:
*Basic Allowance for Housing (BAH) paid to members without dependents living off base in stateside areas should be raised, as budgets permit, so that over time their BAH covers the full cost of rent and utilities for housing comparable to units rented by civilian peers.
Defense pay officials began to close this single members BAH gap, uncovered by the QRMC, when in January it established a BAH “floor” for members without dependents to be no less than 75 percent of BAH for members with dependents. But single BAH will need to reach 95 percent of the with-dependents rate before unmarried members no longer face out-of-pocket costs to rent housing of similar size and quality to civilian peers.
*Partial BAH paid to single members living in barracks or aboard ship should be raised and made variable, based on the type of quarters they live in. The new maximum rate should equal 25 percent of full BAH and be paid to sailors who must alternate bunk time, called “hot bunking,” aboard attack submarines. Current partial BAH, set at $7 to $19 a month for enlisted, would end for single members living in “one-plus-one” quarters, the equivalent of a two-bedroom apartment shared with one other member.
*New Constructive Credit authority would allow the services to raise permanently the basic pay of members advanced ahead of their peers. This would be done by assuming, for pay purposes only, that top performers entered service a year earlier than they did so that they would reach longevity steps built into the military pay table sooner than peers. The same authority could be used to make more competitive pay offers to physicians.
By law, the president must direct a review of military compensation every four years. These recommendations are from volume one of a two-volume 10th QRMC report. Volume one looks at needed changes to cash compensation. Volume two, to be released in late summer, will make recommendations on qualify of life, retirement and health benefits.
Defense officials will study the recommendations and decide what changes the administration wants to embrace, seek new legislative authority where needed to make compensation more flexible or efficient.
Jan “Denny” Eakle, a retired Air Force brigadier general and former deputy director of the Defense Finance and Accounting Service, has served as 10th QRMC director since it began work in February 2006.
In an interview she said “it’s a bit disingenuous” to still refer to a 3.5 percent pay gap today between the military and private sector, based on wage growth since 1981 when officials declared military pay had reached “comparability” with private sector civilians.
Military people need a new tool to recognize the “real value” of their pay and benefits, she said. The yardstick now used is Regular Military Compensation. RMC combines basic pay, housing allowance, food allowance plus an estimated value to the federal income tax advantage that servicemembers enjoy as a result of their tax-free allowances.
The 10th QRMC recommends replacing RMC with Military Annual Compensation or MAC. In addition to the four RMC elements, MAC would include the estimated value of out-of-pocket health costs avoided because of military health care. It also would assign a value to military retirement for members entering the career force and value additional tax breaks on military allowances tied to social security taxes and state taxes avoided.
MAC then would add between $4,300 to and $16,100 to the value of enlisted member compensation and between $4,100 to and $30,000 to officer compensation, Eakle said, when comparing military pay and benefit values to the private sector.
If Defense leaders chose to adopt MAC, Eakle said, pay comparability should be declared when MAC reaches or exceeds the 80th percentile of compensation for civilians of the same age and education level. She said MAC for both officers and enlisted members does exceed that 80th percentile.
Asked if MAC would serve to hold down future military pay raises, Eakle said basic pay adjustments will continue to be tied, by law, to annual private sector wage growth. But servicemembers should begin to see more clearly the relative value of their compensation elements.
“Our intent is to have a better measure to compare two individuals — one wearing the uniform, one in the private sector — and say, ‘What would this member have to make, were he a civilian, to be at the same standard of living,’” Eakle said. She later added, “We need to educate the force on what the real value of their compensation is.”
