Pushing The Military Pay Envelope

But higher wages may not help attract and keep recruits

Defense Secretary William S. Cohen played Santa Claus early this winter. On Dec. 21, he proposed a 4.4% across-the-board pay hike for officers and enlisted personnel and a richer pension formula for two-thirds of his troops next year, followed by annual pay increases of 3.9% for the following five years. Cohen said those increases are essential to keep troops from leaving for high-paying jobs in the booming private sector. By the end of February, the Senate was expected to go Cohen one better, adding $5 billion to his six-year, $25 billion pay-raise package.

But the focus on pay may be misplaced. It's not clear how bad--or long-lasting--the recruitment and retention problem really is. And it's even less clear that raising pay would solve it. Reports by RAND, a think tank in Santa Monica, Calif., and other experts say that military pay is generally in line with pay for comparable civilian workers. The bigger drawbacks to military service, these experts say, are noneconomic, from frequent deployments that separate troops from their families to the increasing preference of high school graduates to go directly to college without a detour in uniform.

So fix those noneconomic problems first, many experts say. The alternative, a big pay and benefits increase, could look like a waste of money if the economy softens and the recruiting and retention problem disappears. "We shouldn't lock ourselves into decisions that have very significant long-term budgetary consequences," says Steven M. Kosiak of the independent Center for Strategic & Budgetary Assessments in Washington.

Recruiting and retention aren't red-alert crises for all the services. The Navy, which has the biggest problem, fell 13% short of its recruitment goal of 55,000 last fiscal year. Yet last year, the Marines met their target, the Air Force was actually oversubscribed, and the Army met 99% of its goal. Retention has a similarly mixed record. It has dipped in the Navy and Air Force, as pilots bail out of their fighters and opt to fly commercial jets. And computer programmers and repair technicians are retreating to the private sector. But in the Army and Marines, reenlistment rates are above their levels in the mid-1990s, when the services were encouraging people to leave.

LIVING WAGE. Pay-hike proponents say military raises have lagged 13.5% behind the private sector since 1982. That figure is based on a comparison with the Employment Cost Index, which measures changes in private-sector compensation. But when RAND compared changes in military pay with changes for comparable civilian workers (adjusting for such factors as age and educational level), the gap vanished.

What's more, when RAND looked not just at changes in compensation but also at the actual levels of pay, it found the pay for most troops was higher than that of 70% to 80% of comparable private-sector workers. For example, an Army corporal with four years of service gets $2,017 a month. That's the 78th percentile for civilian males 22 to 26 with a high school education. For an Army major with 12 years of service, the pay is $4,949 a month, the 70th percentile for civilian males 32 to 36 with four or more years of college.

Critics advocate offering bigger signing and reenlistment bonuses--to combat the effects of the strong economy without locking in higher pay--while targeting permanent raises to hard-to-fill slots such as for pilots. (Only about a quarter of Cohen's pay-hike budget proposal is for targeted increases.)

The Pentagon says that such ideas miss the point: Troops that are on call to put their lives on the line deserve to be paid more. "We feel this [Pentagon proposal] is a very fair package that reflects the uniqueness of military life," says Rudy deLeon, Under Secretary of Defense for personnel and readiness.

Some experts think a major Pentagon problem is that it draws from a shrinking pool: young people who earn high school degrees but don't go to college. The share of 18- and 19-year-olds who enroll in college skyrocketed from 46% in 1980 to 60% in 1994. Army Secretary Louis Caldera suggests taking in more high school dropouts to fill holes. But that's controversial.

RAND analyst Beth J. Asch suggests a different strategy: Let enlistees go to college first, then serve. That's how the Reserve Officer Training Corps works, but ROTC is only for officers. Putting college first could attract the quality troops the Pentagon needs as its work becomes more high-tech. And it could improve retention because troops wouldn't have to leave to get degrees, as many do now.

The brass also must cope with declining interest in serving in the military. RAND suggests trying commercial approaches, such as using private telemarketing companies. To cope with retention, the Pentagon is sensibly moving toward making sure the same units don't go out time after time.

In contrast, the Administration's plan to fatten pensions might aggravate retention woes. The goal is to give all retirees 50% of their final pay after 20 years of service. That's how it was until Aug. 1, 1986. Recruits starting since then are promised only 40% of pay after 20 years. Pentagon officials say the cut has caused acrimony in the ranks. But the liberal Center on Budget & Policy Priorities notes that the Pentagon's 50% policy was adopted to encourage retirement and make room for younger recruits. Now, the Pentagon is making the opposite claim--that higher pensions will encourage reenlistment. If the generals were right the first time, they'll be left with a $6 billion mistake.

The Pentagon's ills will take imagination to cure. But the White House and Congress are using an economic artillery shell. Considering the forces at work and the services' different experiences, precision-guided financial weapons may make more sense.

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