Issue: Uniformed service members' basic pay must be reasonably comparable with private sector pay scales and adjusted annually as necessary to restore/maintain comparability with private sector pay increases.
Background: Military pay tables were overhauled in 1971 with the advent of the all-volunteer force to set military pay rates at levels of reasonable comparability with private sector pay for civilian workers with similar skills, education and experience. But military raises were capped for budgetary reasons during the 1970s, and serious retention and readiness shortfalls followed. These problems were addressed with double-digit raises in 1981 and 1982, which were generally acknowledged to have restored military pay to levels "reasonably comparable" with private sector pay.
Despite this hard-learned lesson, the extended retention rebound of the 1980's, coupled with rising budget deficits, led multiple Administrations and Congress to continue capping military raises below private sector pay growth, as measured by the government’s Employment Cost Index (ECI) in 12 of the next 16 years. By 1999, the cumulative military pay raise shortfall had reached 13.5%--predictably accompanied by a new retention and readiness crisis.
Congress at the request of the services senior military leadership, the Joint Chiefs of Staff, responded with law changes aimed at closing the pay gap over a period of years. In FY 2004, Congress enacted legislation that all future military pay raises would be tied in law to the Employment Cost Index (ECI). Only exceptions to not approve pay raises at ECI are related to the President (POTUS) under his constitutional authority as the commander in chief of the armed forces. Under current provisions, unless Congress, who has the final authority regarding military pay, weighs in and directly states support for the pay raise, when POTUS uses his authority to reduce or cap the pay raise at a rate lower than ECI, the president can get the lower pay raise authorized by citing economic hardship or reasons of national security.
The Executive Branch and Congress approved military pay raises at least .5% above private sector pay growth ECI to close the 1999 pay gap through 2010 and at ECI up through FY2012.
In FY2013, 14, 15, 16 and 17 President Obama used executive authority to notify Congress of an alternative pay adjustment affecting active duty military pay. The FY 2017 Defense legislation provides an example of the interaction between POTUS and the Congress regarding the annual military pay raise. The President in FY17 told Congress that he was using his authority under law to cap the active duty military pay raise at 1.8 percent due to current economic concerns. Under ECI, the active duty pay raise would have been 2.1 percent. The House of Representatives in their FY17 Defense bill disagreed with the POTUS position and subsequently fully endorsed the 2.1 percent pay raise which became law in the FY 2017 National Defense Authorization Act (NDAA).
The challenge moving forward will be to sustain military pay raises equal to private-sector pay growth (ECI) during projected periods of budget austerity—due predominately to sequestration and not allow, the pay gap which currently stands at 2.6% to widen. Past experience in the 1970s, ‘80s, and ‘90s has been that tight budgets have driven caps on military pay raises, and that those caps have continued until they undermine retention and readiness.
MOAA’s hope is that we can learn from past experience that sustaining pay comparability is important to prevent retention problems.