April 3rd, 2009
Considering the military pay gap is, by reports, 2.9% and a increase of 2.9% (President Obama’s proposal) or the 3.4% increase (based on the House and Senate’s proposal) combined with the economy declining it stands to reason the gap may be proclaimed as closed by the next election season.
The problem is, I think the way the gap is figured is not a fair measure – it compares a single military worker vs a single worker in the civilian sector. In my opinion the pay gap should consider the military family’s earning power. Military families transfer from one location to another which forces the spouse to leave whatever employment they held, causing the spouse to basically start over – most times taking a pay cut (if they can even find new employment at the new location). Due to the requirement of transferring, Military members do not tend to build equity in homes (yes, the VA Loan Guaranty Program helps by allowing qualified members to get a no money down loan but that doesn’t help the equity situation created by having to sell a home every 2-4 years). Thing is, many issues exist which are not effectively covered by the current pay formulas.
However, the gap is, using the current formula, closed ever so slightly by the 2010 raise, why doesn’t the government just jack up the base pay in a single year and finally, and unquestionably close, the gap? One reason adjusting base pay becomes difficult from a budgetary standpoint because the base pay is linked to out year spending for those who retire from military service.
Accounting for Military Retirement in the Federal Budget
All DOD budgets through FY1984 reflected the costs of retired pay actually being paid out to personnel who had already retired. Congress simply appropriated the amount of money required to pay current retirees each year as part of each annual defense appropriations bill. Since FY1985, the “accrual accounting” concept has been used to budget for the costs of military retired pay. Under this system, the DOD budget for each fiscal year includes, not the amount of retired pay actually paid to retirees, but rather, a contribution to the military retirement fund sufficient to finance future retirement payouts to current uniformed personnel when they retire. These annual “accrual” contributions accumulate in the military retirement fund, along with interest earned on them. The amount that the Defense Department must contribute each year to cover future retirement costs is determined by an independent, Presidentially appointed, Department of Defense Retirement Board of Actuaries, which decides how much is needed to cover future retirement costs as a percentage of military basic pay. Once military personnel retire, payments to them are made, not from the annual Department of Defense budget, but from the accumulated amounts in the military retirement fund. Estimated future retirement costs are arrived at by making projections based on the past rates at which active duty military personnel stayed in the service until retirement, and on assumptions regarding the overall U.S.
economy, including interest rates, inflation rates, and military pay levels. Approximately 30% of military basic pay costs must be added to the DOD personnel budget each fiscal year to cover the future retirement costs of those personnel who ultimately retire from the military.
Beyond base pay, there are other measures used to compensate the service member for living expenses. Basic allowance for housing (BAH) amounts are essentially based on the housing costs of the location the service member and the member’s dependent status. Basic allowance for subsistence (BAS) and is determined by the Department of Agriculture’s food-cost index. Cost of living allowance (COLA) is a supplement received by members stationed in areas considered to be high cost.
No supplemental military pay considers the military families unique dynamic of lost family earnings. The service member and family moves because they are filling a need of the service. Something like COLA may be an area of compensation which could be used to adjust the family earning power and not affect increase the accrual compensation required of the DOD budget. Maybe a “cost of move” pay – a monthly amount provided to all members based on a “family earning power” gap.
Thoughts?
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I think you read my mind. I literally was JUST going to write a very similar post to this.
Thank you for addressing this. I completely agree. I am very nervous about us losing my income when we move. As of right now, Im hoping that I can just find a job when we move even if I have to take lower pay.
Thanks!
Comment by NeverApartInHeart — April 3, 2009 @ 5:53 pm
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U kiddin me,
an active duty in my pay grade with my TIS is making around 5K “base” pay thats “with out” considering any 2010 pay raise. And that’s not even counting ALL the extra pay incentives like jump pay, sep rats, overseas pay, family sep pay, combat pay, flight pay, ect ect.
My retired pay is around an active E-6 with 8 years now. Since there won’t be any COLA for us this year, or even next year, were pretty much getting priced out of even the so called “benefits” we were told about were so good to stay over 20.
The commissary, PX, and even Tri-Care all raise prices by looking at what the “active duty” gets paid. So if your looking at NO COLA for the next 2 years and active continues to advance the gap will be impossible to recoup.
The way I see it, if were in such bad shape, no pay raise or COLA’s need be paid to any of us. I retired in 91 with 27 years, I didn’t retire my family. I’m unemployed and so is my wife, at 62 and 68 its not easy to find a “good” paying job.
Comment by Hoody — July 6, 2009 @ 4:28 pm
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