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The Role of Incentive Pays in Military Compensation

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Congressional testimony

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I would like to thank the Committee for the opportunity to testify. I will address my comments to the utility of incentive pays in influencing career decisions of members of the U.S. military. The armed forces share a common foundation of military pay. The foundation includes basic pay, basic allowance for subsistence, basic allowance for housing or housing in-kind, and a military health benefit for service members and their families. Educational benefits could also be included, as could contributions toward retirement benefits. This foundation of pay performs several functions. It helps to ensure that the services can recruit, retain, and motivate the number and caliber of people they need to meet manpower requirements, produce a flow of capable future leaders within the enlisted and officer ranks, and shape the force so that its experience and grade mix are appropriate to the desired force structure. The health of the volunteer force depends on maintaining an adequate foundation of pay. This seems like an obvious statement, but at times the nation has inadvertently tested its validity. The combination of basic pay, basic allowance for subsistence, and basic allowance for housing were set high enough at the start of the volunteer force in 1973 to enable a successful launch. Yet lower than adequate pay increases in the following years led to a recruiting and retention crisis at the end of the 70s, and Congress faced the alternatives of returning to a draft or restoring military pay to competitive levels. Congress chose to restore pay, increasing it a total of 26 percent in fiscal 1980 and 1981. A second test occurred as the economy boomed in the late 1990s. Again military pay did not keep up with pay in the private sector and strains developed in recruiting and retention, though not as severe as in the late 1970s.

Subject Categories:

  • Economics and Cost Analysis
  • Personnel Management and Labor Relations

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