Military/Civilian Compensation

[ChiefJohn]

Observation Post — Comparing Military, Civilian Compensation


2010/04/30 00:00:00

By Tom Philpott
Congress tasked the GAO to compare military compensation with that of private-sector employees and report on what it found. The report was delivered in April. Observation Post columnist Tom Philpott recently interviewed Brenda S. Farrell, the GAO’s director for defense capabilities and management, who led the report team.
Farrell explained the GAO had three goals: look at total military compensation; look at how military pay compares to civilian pay; and assess a recommendation from the 10th Quadrennial Review of Military Compensation (QRMC) that, in judging the adequacy of military compensation, DoD officials should begin to look at selected benefits, too — specifically retirement and health care, in addition to pay and allowances. The following interview has been edited for length and, in some cases, clarity.

Philpott: What did you find [from the research]?
Farrell: When you’re comparing military and civilian pay, the more detailed you try to get, the more complex it becomes. For our first objective, assess total military compensation, it sounds like DoD should be able just to roll that out. But it’s not easy. There are so many components to military compensation, from cash elements to noncash items like health care benefits to deferred pay like retirement. Getting a handle on all of that is quite difficult. So when we asked, “What is total military compensation?” our team still had to do a lot of research. There’s an extensive list in the report at www.gao.gov/new.items/d10561r.pdf.

What did you conclude about the 10th QRMC approach to go beyond the cash elements of pay, allowances, and the military tax advantage and include health care and retirement in any comparison with civilians?
We agree with it. You should look at total compensation. What’s called regular military compensation [RMC] — basic pay plus allowances plus tax advantage on allowances — can understate total compensation. DoD gives [servicemembers] all these benefits to retain and recruit them, so using total compensation should be viewed as positive. The more things you have to look at, the more knowledgeable you can be.

Yet DoD officials, for now, have rejected that recommendation?
We still hope they change their minds. One reason they give is that RMC is a more definitive value. When you start dealing with benefits, assigning values depends a lot on assumptions. It’s very tricky to come up with those. But we still think there’s value in including benefits, even if you have to use ranges of values.

GAO would go beyond what the QRMC recommended and include the value of military retiree health care in the compensation comparison, too.
It is a big benefit. The military has health care now from cradle to grave. We feel that should have a value placed on it.

When you compare benefit packages, the military comes out on top?
All the studies we reviewed showed military packages are very favorable compared to counterparts — or as close as you can come to counterparts — in the civilian economy. Defense officials even call it robust. We refer to it as “very comprehensive,” a vast array of pays and benefits.

In pay alone, you said, the military compares favorably?
That’s correct.

How did you reach that judgment?
We relied primarily on work done for the last QRMC by the Center for Naval Analyses. We looked at their methodology, assumptions they had made, and data sources. Another key report was from the Congressional Budget Office. We looked at what we had done in the past, too. From these credible studies we conclude that, at this time, the military pay package is very comprehensive.

An issue for MOAA and many military people is trying even to compare military pay and benefits [to civilian benefits] when servicemembers face frequent deployments, dangerous service, and live at risk. What do you say to that?
They have a good point. We make it on the first page of our report. Military life requires long and multiple deployments and sometimes risk of life — unlike many civilian jobs. We reported in 1986 that an exact comparison between military and civilian occupations could not be made for that reason as well as data limitations. So it is something one has to be careful with and [one has to] keep in mind that military life is much different.

Pentagon pay officials also argue that if the services are recruiting and retaining the number and quality of people they need, that’s a good measure that compensation is competitive. Does that make sense?
Recruiting and retention are primary indicators that compensation could be adequate. You shouldn’t look just at comparing pay and — if under or over — make the assumption something is wrong.
DoD has to recruit 180,000 every year, maintain an active duty force in the neighborhood of 1.2 million, and [maintain] another million in [its] reserve components. Those numbers alone present a monumental challenge. [DoD needs] to use as many tools as available to determine if pay is adequate and efficient.

Inside the military, of course, are a variety of occupations from desk jobs to infantrymen on the front line to highly skilled pilots. Does that make it very difficult to make general pay comparisons with civilians?
It can. For occupations that require special skills or that have a critical need, there are bonuses and special and incentive pays to help compensate those folks.

Your report, however, suggests there should be less reliance on annual across-the-board military pay raises and more use of targeted raises.
We make the point that a key indicator of compensation effectiveness is recruiting and retention. Recruiting has, overall, done very well except for three years: 1998 [and] 1999, and the Army missed its goal in 2005. There still are shortages in critical areas. Medical is one. In the past, it’s been military police or computer technicians. It makes one realize that you do need to target critical-skill shortages, and bonuses could be a more effective way to do that rather than across-the-board [pay raises] for everyone.

Your report mentions recent benefit gains, including the new Post-9/11 GI bill, but suggests benefit improvements are not visible enough to military people.
That’s probably where DoD could do better, informing servicemembers and [their] families of benefits available to them that are not in the civilian sector. It’s difficult for [servicemembers] to realize how much they do have. Yet it can be a great recruiting and retention tool if DoD makes that better known.

A worry for MOAA and other military and veterans’ associations is the pendulum on gains in military pay and benefits during the past decade will begin to swing backward because of worries over rising military personnel costs and growth in federal entitlements. Is that a legitimate concern?
The military compensation package has done very well the last 10 years. Since about 2002, basic pay has been increasing, which it probably needed to do. Since then, a number of benefits have been added. One of the biggest was last year’s enhanced educational benefit. There’s recognition you need a comprehensive package to maintain the all-volunteer force.
The scrutiny under way now from Congress is to monitor that package and to try to prevent what has happened in past years.
All we can say right now is that the compensation package looks very comprehensive. If you look at RMC like a temperature gauge, it’s higher than 70 percent of the civilian population’s pay. When you fill in selected benefits that most people use — health care and retirement — it’s 80 percent. Considering what’s going on with the economy, it’s very attractive.
It’s up to Congress and DoD to make sure it remains a good package and achieves what it’s designed to achieve: an all-volunteer force.

About the author: Tom Philpott is a freelance writer and syndicated news columnist. His column, "Military Update," appears in 48 daily newspapers throughout the United States and overseas.

Copyright Tom Philpott and Military Officers Association of America. All rights reserved.

[desertrv]

This is a lot to put your hands around. I am now planning on looking at this very close. Thanks for the post.