Summary: The military compensation system costs about $40 billion a year. No overall guiding policy or principle for compensating military personnel has been established. The private sector is the standard for setting and adjusting federal civilian pay. In order to attract, retain, and motivate the quality and quantity of military members necessary to maintain the desired level of national security at a minimum cost to the government, a decision must be reached on the method of implementation for military pay principles. Two alternative approaches have been suggested: comparability and competitiveness. Comparability approaches use wage surveys of other workers as a guide to setting and adjusting pay based on age-earnings profiles and job difficulty. Competitive approaches are based on the principle that compensation should be adequate to attract and retain the desired quantity and quality of personnel, but should not be more than necessary for this purpose.
Comparability approaches provide stability and security to service members, but lack flexibility to adjust to changing manpower needs. Competitive approaches provide the flexibility necessary to adjust compensation to changing military manpower needs; however, they lack a clearly defined level of stability to ensure members that their pay will remain roughly comparable to pay for federal civilians and private sector employees. A combination of the best qualities of both comparability and competitiveness may be necessary to satisfy the need for stability and flexibility in the military compensation system. The Department of Defense, the services, and the Office of Management and Budget are subjected to competing pressures which make any future agreement on military pay principles unlikely. A permanent, independent compensation board would be better able to reach an agreement on military pay principles.
