The director of the 13th Quadrennial Review of Military Compensation (QRMC) asked CNA to carry out three tasks:
1. Identify potential second- and third-order effects of a move from the current pay and allowances system for regular military compensation to a single-salary system (SSS).
2. Prioritize these potential effects to determine which are most important for further research and analysis.
3. Develop study designs for analyzing the selected second- and third-order effects.
This report presents our findings and recommendations regarding these tasks. We identified more than 25 potential effects in six broad areas: housing and food arrangements, retention and separation pays, changes in the dependency ratio, family and dependent benefits, income support programs, and other effects. For these potential effects, we report information on the number of people potentially affected, budget costs, and potential risks to readiness, based on an extensive literature and policy review and conversations with subject matter experts from across the Department of Defense (DOD) and the services. We also highlight potential research questions that could form the basis for additional empirical work on the effects of a move to an SSS on cost and military readiness, as well as policy changes that may be needed to mitigate these effects.
We recommend that DOD undertake additional analysis in the following areas:
- Housing and food arrangements—including onbase and offbase housing, overseas housing, and military meals programs
- Retention and separation pays—including Continuation Pay (CP), Selective Reenlistment Bonuses (SRBs), Nondisability (Involuntary) Separation Pay, Voluntary Separation Pay, and Disability Severance Pay
Each of these policies affects a relatively large number of people. Housing and food arrangements affect every servicemember, the retention pays (CP and SRBs) affect 100,000 or more members, and the separation pays affect several thousand each year. Each also has potentially large budgetary impacts—several billion dollars per year for housing and food arrangements, and several hundred million dollars annually in the case of retention and separation pays. Finally, these policies involve potentially substantial risks to member nutrition, family support, and retention, and thus military readiness. Other, lower priority policies affect fewer people, have smaller budget implications, and/or pose risks to readiness that are more limited.
We also recommend that DOD consider the potential effects of an SSS on military marriage rates and the dependency ratio. Military retention rates are higher for married servicemembers than for single members, which may be at least partially because of the difference in basic allowance for housing (BAH) rates for members with and without dependents. An SSS that eliminates BAH and the with-dependent compensation advantage may have important implications that cut across the other high-priority policy areas of housing, retention, and ultimately military readiness. In addition, we include a set of research study ideas for analyzing the highest priority effects. These ideas include the following:
- Funding alternatives for privatized housing operations under an SSS
- Estimating how an SSS could affect marriage rates and retention
- Alternative methodologies for incorporating housing costs into an SSS
- Adapting overseas housing benefits to an SSS
- Effects of an SSS on demand for military meals programs
- Efficiencies of moving to lump-sum, flat-amount SRBs
DISTRIBUTION STATEMENT A. Approved for public release: distribution unlimited.
Specific Authority. To protect information not specifically included in the above reasons and discussions but which requires protection in accordance with valid documented authority such as Executive Orders, classification guidelines, DoD or DoD-component regulatory documents. 8/12/2019
- Pages: 88
- Document Number: DRM-2019-U-020181-1Rev
- Publication Date: 8/12/2019