Research for Military Compensation

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Comparing Military and Civilian Compensation Packages
March 1, 2008

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

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Military Compensation: When 50-Year Olds Decide What 20-Year-Olds Want
September 1, 2005
Congressional mandate requires DoD to review its forces, resources, and programs every 4 years. As part of this Quadrennial Defense Review (QDR), the Office of the Under Secretary of Defense, Personnel & Readiness requested an overview paper on how DoD can improve military manpower management. Given increasing personnel costs and budgetary pressures to control spending, cost-effective manpower management has taken on additional importance. We conclude that the military compensation package could be better aligned with what Servicemembers value. In particular, the value of the military retirement package to personnel is not commensurate with its significant cost to DoD. Furthermore, current rotation policies can significantly detract from military service; programs that allow personnel choice in their assignments would lower cost and improve the value of the overall compensation package. On the demand side, we conclude that current processes increase requirements. Rotation policies increase turnover and directly reduce performance. Furthermore, units and commands do not have visibility into the compensation or full cost of military personnel. Finally, DoD faces several constraints that result in decisions unrelated to the military mission. More discretion in using military personnel funds and relaxing the endstrength constraint would improve the cost-effectiveness of military manpower management.
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