thedrifter
07-25-06, 02:54 PM
July 31, 2006
Comparing your pay
Debate centers on disputed gap between military, civilian wages
By Rick Maze
Staff writer
Whether the size of the Jan. 1 all-ranks military pay raise will be 2.2 percent or 2.7 percent could be based on how many lawmakers believe there is still a gap between military and private-sector pay.
The existence of the pay gap has been disputed for years, even as Congress embarked on a five-year plan to slowly increase the value of military pay by providing annual raises that were 0.5 percentage point higher than average private-sector increases.
For those who insist it exists, the gap is measured by comparing military raises to the average annual increase in the Economic Cost Index, a Labor Department gauge of the cost of employment in the private sector.
The last time military pay was roughly on a par with the ECI was 1982, the second consecutive year of double-digit military pay hikes under President Reagan that were designed to make military pay comparable to private-sector wages.
Measured in that way, the gap had grown as high as 13.5 percent by 1998, when Congress ordered increases in basic pay that were greater than average raises for the private sector so the military could catch up.
Congress acted, even though its nonpartisan analytical arm, the Congressional Budget Office, discounted the significance of comparisons between military pay and private-sector wages.
“Any measure of the change in relative pay between military personnel and civilian workers, cumulated over many years, is not a useful guide for pay policy,” the CBO warned in a June 1999 report. “At best, a comparison of pay levels might indicate whether the nation was treating military personnel fairly — either in the sense of offering them a lifestyle roughly comparable with that of civilian workers, or of paying them about what they might expect in civilian jobs.”
Cindy Williams, a Massachusetts Institute of Technology research scientist specializing in military personnel issues, makes the same point in a recent issue of Regulation magazine, a publication of the Cato Institute.
Williams said direct military pay has become less important as a factor in wage comparisons because noncash benefits account for about 36 percent of military compensation, or roughly $40,000 per active-duty member.
The government’s cost of pay and benefits increased by 28 percent from 2000 to 2004, more than twice the increase in civilian salary costs. About half of the military cost growth came from noncash or deferred benefits, she said.
As Congress was drawing up plans for higher military raises in the late 1990s, senior defense officials also denied existence of a 13.5 percent pay gap, suggesting that the gap was 4.4 to 4.8 percentage points less.
That is because the Pentagon standard has been to set raises at the 70th percentile of civilian wages — meaning service members would make more than 70 percent of civilians of similar age, education levels and responsibilities.
Congress ignored the arguments, ordering raises that were 0.5 percentage point more than average increases in the private sector under a pay formula that expired with the 3.1 percent pay raise Jan. 1, 2006.
Several years of gap-reducing raises have still left military pay about 4.5 percent short of civilian wages, when comparing increases in the ECI since 1982. But if the Pentagon’s insistence that the gap is overstated by four to five percentage points is true, that would mean rough parity exists today.
Negotiators drawn from the House and Senate armed services committees to finalize the 2007 defense authorization bill must decide whether to approve the 2.2 percent basic pay raise requested by the Bush administration and accepted by the Senate, which would match last year’s private-sector increases, or the slightly larger 2.7 percent raise passed by the House, which would continue closing the pay gap.
Members of the Military Coalition, a group of more than 30 military-related associations, are urging lawmakers to approve the larger raise.
“We are supporting the House version,” said Steve Strobridge of the Military Officers Association of America, one of the groups in the coalition.
“The real issue is, are we still going to stick with the 1982 pay standard or to switch over to the Pentagon’s pay standard of setting pay at the 70th percentile of civilians with similar education and age?”
Ellie
Comparing your pay
Debate centers on disputed gap between military, civilian wages
By Rick Maze
Staff writer
Whether the size of the Jan. 1 all-ranks military pay raise will be 2.2 percent or 2.7 percent could be based on how many lawmakers believe there is still a gap between military and private-sector pay.
The existence of the pay gap has been disputed for years, even as Congress embarked on a five-year plan to slowly increase the value of military pay by providing annual raises that were 0.5 percentage point higher than average private-sector increases.
For those who insist it exists, the gap is measured by comparing military raises to the average annual increase in the Economic Cost Index, a Labor Department gauge of the cost of employment in the private sector.
The last time military pay was roughly on a par with the ECI was 1982, the second consecutive year of double-digit military pay hikes under President Reagan that were designed to make military pay comparable to private-sector wages.
Measured in that way, the gap had grown as high as 13.5 percent by 1998, when Congress ordered increases in basic pay that were greater than average raises for the private sector so the military could catch up.
Congress acted, even though its nonpartisan analytical arm, the Congressional Budget Office, discounted the significance of comparisons between military pay and private-sector wages.
“Any measure of the change in relative pay between military personnel and civilian workers, cumulated over many years, is not a useful guide for pay policy,” the CBO warned in a June 1999 report. “At best, a comparison of pay levels might indicate whether the nation was treating military personnel fairly — either in the sense of offering them a lifestyle roughly comparable with that of civilian workers, or of paying them about what they might expect in civilian jobs.”
Cindy Williams, a Massachusetts Institute of Technology research scientist specializing in military personnel issues, makes the same point in a recent issue of Regulation magazine, a publication of the Cato Institute.
Williams said direct military pay has become less important as a factor in wage comparisons because noncash benefits account for about 36 percent of military compensation, or roughly $40,000 per active-duty member.
The government’s cost of pay and benefits increased by 28 percent from 2000 to 2004, more than twice the increase in civilian salary costs. About half of the military cost growth came from noncash or deferred benefits, she said.
As Congress was drawing up plans for higher military raises in the late 1990s, senior defense officials also denied existence of a 13.5 percent pay gap, suggesting that the gap was 4.4 to 4.8 percentage points less.
That is because the Pentagon standard has been to set raises at the 70th percentile of civilian wages — meaning service members would make more than 70 percent of civilians of similar age, education levels and responsibilities.
Congress ignored the arguments, ordering raises that were 0.5 percentage point more than average increases in the private sector under a pay formula that expired with the 3.1 percent pay raise Jan. 1, 2006.
Several years of gap-reducing raises have still left military pay about 4.5 percent short of civilian wages, when comparing increases in the ECI since 1982. But if the Pentagon’s insistence that the gap is overstated by four to five percentage points is true, that would mean rough parity exists today.
Negotiators drawn from the House and Senate armed services committees to finalize the 2007 defense authorization bill must decide whether to approve the 2.2 percent basic pay raise requested by the Bush administration and accepted by the Senate, which would match last year’s private-sector increases, or the slightly larger 2.7 percent raise passed by the House, which would continue closing the pay gap.
Members of the Military Coalition, a group of more than 30 military-related associations, are urging lawmakers to approve the larger raise.
“We are supporting the House version,” said Steve Strobridge of the Military Officers Association of America, one of the groups in the coalition.
“The real issue is, are we still going to stick with the 1982 pay standard or to switch over to the Pentagon’s pay standard of setting pay at the 70th percentile of civilians with similar education and age?”
Ellie