A 4.5 Percent Military Pay Raise for 2025?

On July 14, 2023, the House of Representatives approved their version of the National Defense Authorization Act for Fiscal Year 2024 (NDAA-2024) by a vote of 219 to 210, and just two weeks later the full Senate passed their version with a vote of 86 to 11. Both Houses of Congress have issues within the bill to resolve, but one line item not proving to be contentious is the 5.2 percent pay raise for members of our armed forces.

The 5.2 percent pay raise for 2024 is in-line with the statutory call of the law, described in United States Code Title 37, which dictates the procedure for adjustments of military basic pay. The pay raise percentage also matches President Biden's budget proposal released back on March 9th. Once ultimately approved, the raise would be effective January 1, 2024.

Even though the process for the 2024 raise has not yet finalized, the process for determining the pay raise for 2025 begins today. As mentioned, United States Code Title 37 provides the starting point for military pay raises, and today, , at 0830 EST, the United States Bureau of Labor Statistics released the Employment Cost Index (ECI) data which provides the starting point. This morning's figure indicates a 4.5 percent military basic pay raise for 2025.

The President and Congress does have the ability to vary from the ECI figure, and in the past they have exercised that option, but it is a relatively rare occurrence; even when inflationary pressures are abound. First, raises to military basic pay are not directly linked to consumer prices. Basic pay raises are linked to pay raises of those in the private workforce; hence the use of ECI data.

For "cost of living" fluctuations, allowances such as Basic Allowance for Subsistence (BAS), Basic Allowance for Housing (BAH), and even a separate Cost of Living Allowance (COLA) can be made to help relieve the upward cost of consumer goods inflation often brings.

The next pay indicator for what 2025 may bring is the President Biden’s budget release expected sometime in the Spring of 2024.

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