Military pay report: 'Gap' with civilian wages closed
Published Thu, Mar 20, 2008 12:00 AM
Tom Philpott
milupdate@aol.com

A new Department of Defense study of military compensation finds no pay gap exists today between service members 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 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 also calls for changes to key elements of cash compensation:•Basic Allowance for Housing paid to members without dependents living off-base in stateside areas should be raised, as budgets permit, so that over time their allowance 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 Basic Allowance for Housing gap, uncovered by the Quadrennial, when in January it established an allowance "floor" for members without dependents to be no less than 75 percent of allowance for member with dependents. But single allowance 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 Basic Allowance for Housing 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 allowance and be paid to sailors who must alternate bunk time, called "hot bunking," aboard attack submarines. Current partial allowance, 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 permanently raise 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 Quadrennial 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.

Dr. Jan "Denny" Eakle, a retired Air Force brigadier general and former deputy director of the Defense

Finance and Accounting Service, has served as 10th Quadrennial 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.

These pay gap claims are based solely on basic pay and ignore hefty increases in housing allowances, a major element of military compensation. Eakle said that when allowances are counted, cumulative growth in military compensation since 1981 has exceeded civilian pay growth by 6.5 percent.

But 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. It combines basic pay, housing allowance, food allowance plus an estimated value to the federal income tax advantage that service members enjoy as a result of their tax-free allowances.

The 9th Quadrennial said pay comparability is achieved when compensation equals or exceeds the 70 percentile of salaries or wages going to private sector workers of similar age and education level. Average Regular Military Compensation for both enlisted members and officers exceeds the 70th percentile, Eakle said.

The 10th Quadrennial recommends replacing compensation with Military Annual Compensation or MAC. In addition to the four Regular Military Compensation elements, MAC would include the estimated value of out-of-pocket health costs avoided because of military health care. It also would assigned 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 $4,300 to $16,100 to the value of enlisted member compensation and $4,100 to $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 membersexceeds 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 service members should begin to see more clearly the relative value of their compensation elements.

"We need to educate the force on what the real value of their compensation is,"Eakle said.

Ellie