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Military and Private Sector Pay Gap Widens

A 1.6% Pay Raise Proposal for 2017

Updated: February 12, 2016

Tomorrow, February 9, 2016, President Obama will release his eighth and final fiscal year (FY) budget proposal for his two terms in office. The President’s FY-2017 proposal will cover all departments within the government including the Department of Defense.

Where there are many line items of interest, the one that is covered the most here is compensation; most specifically, pay. This year’s budget request will see just a 1.6 percent increase in Basic Pay over 2016.

As what is normal for these budget proposals, the amount of any increase indicated for Basic Allowance for Housing for 2017 will be just a swaged placeholder amount – don’t get excited over it.

The thing that is most noteworthy about the President’s Basic Pay proposal is the fact that it is once again below the standard that has been used to calculate such pay raises. The base being, according to Title 37 United States Code §1009 — Adjustments of monthly basic pay, the Employment Cost Index (ECI). Per Title 37, the increase in Basic Pay for 2017 should be 2.1 percent. The President’s proposal of 1.6 percent is one half percent less.

Not a big deal, it is just a half percent, right? Well, for a single year that may be the case, but if allowed to pass – if Congress cannot find the money to fund 2.1 percent – 2017 will be the fourth year in a row that Basic Pay raises have been below the automated ECI adjustment (2014 ECI at 1.8%; 2015 ECI at 1.8%; 2016 ECI at 2.3% — 2014 pay raise at 1%(-0.8); 2015 at 1%(-0.8); 2016 at 1.3%(-1.0))

For periods of time when economic conditions are affecting the general welfare of the populace, the President is granted a provision in Title 37 §1009 to make proposals for pay that would be different than the ECI automated adjustment, and when he invokes that provision, it is up to Congress to find the money necessary for any higher raise amount than proposed by the President. For the previous three years, Congress has not been successful in that endeavor – the President’s proposals have carried the day.

Now, for some historical context, the military saw no raise in pay during the entire Great Depression. Some say that our most recent economic meltdown rivals that period in time. That is up for debate.

Theoretically, by using the automated ECI for pay raises, the military would keep pace with the private sector. For the first decade of this millennium, Congress added an additional half percent per year that was added to ECI in order to close the pay gap that existed between those in the military and the private sector. That pay gap was determined to be closed in the first couple of years of this current decade when the Congressional Budget Office (CBO) and Government Accounting Office (GAO) produced reports that military and civilian compensation was essentially equal.

So, tomorrow, the budget proposal will be officially released, and Congress will have much work to do. Being an election year, expect military pay and compensation to be batted around extensively, but don’t expect much movement to be realized in the final pay beyond the President’s proposal of 1.6 percent.

I expect the gap to continue to widen.

2 Responses to “A 1.6% Pay Raise Proposal for 2017”

  1. bob says:

    The ECI is not a measurement of wages, but of employments costs, so its twice as high since it includes workman’s comp and health insurance costs. GIs earn around 50% more than comparable civlians.

  2. NCCM(Ret) says:


    Right, it is a measure of what the private sector spends on compensation, and in 2010/11 time frame, both the GAO and the CBO produced reports that essentially stated that compensation parity was reached. So, any pull back from that would once again widen that gap that was called closed.

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