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Military Compensation: Balancing Cash and Noncash Benefits

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Issue brief

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To attract and retain the military personnel that it needs, the Department of Defense DoD must offer a compensation package that is competitive with those in the civilian sector and that adequately rewards service members for the rigors of military life. The Congressional Budget Office CBO estimates that in 2002 the most recent year for which comprehensive data are available, the average active-duty service member received a compensation package worth about 99,000. Noncash compensation represents almost 60 percent of the military pay package. Cash compensation -- basic pay, allowances for things like food and housing, special pay and bonuses, and the tax advantage that service members receive because some allowances are not subject to federal income tax -- makes up the other 40 percent. This issue brief provides an overview of the military compensation package and the issues surrounding the current mix of compensation. The militarys traditional use of noncash benefits reflects, in part, a belief that such benefits are cost-effective because they support unit cohesion and reduce the costs that service members incur in searching for new schools, stores, and housing as they move among installations. However, todays military increasingly emphasizes a more expeditionary force -- deploying service members overseas without their families for a shorter period of time rather than rotating members and families to and from overseas garrisons for extended tours. Therefore, some analysts believe that a compensation package more heavily weighted toward cash, which would allow service members to choose the goods and services that they valued most, would enable DoD to maintain a larger and even more capable force for the same total cost.

Subject Categories:

  • Administration and Management
  • Economics and Cost Analysis
  • Military Forces and Organizations

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