Comparing Military and Civilian Compensation Packages
A standard method of comparing military and civilian compensation is to focus on the cash portion of the compensation package. Studies have shown that on average, Regular Military Compensation (RMC) compares favorably with the earned income of the 70th percentile full-time civilians of similar education levels. However, looking only at cash ignores differences in the relative value of military and civilian non-cash benefits, and is akin to assuming they are equal. We show that military benefits are more valuable using 2005 data to estimate the differences in the relative values of three important benefits: the State and FICA military tax advantages, the health care benefit, and the retirement benefit. We add these differences in values to military cash compensation to form a more accurate “benefits-equal” comparison of military and civilian compensation packages. The top line dollar amount estimated by this method is called Military Annual Compensation (MAC), and compares favorably with the 80th percentile earned income for comparable civilians. Our analysis finds that the annual values of the military benefits are greater by amounts ranging from roughly $3,700 to $28,000, depending upon rank and length of service. Future comparisons of military and civilian compensation packages should include non-cash benefits
