Military Pay: Key Questions and Answers

From the earliest days of the republic, the federal government has compensated members of the Armed Forces for their services. While the original pay structure was fairly simple, over time amore complex system of compensation has evolved. The current military compensation system includes cash payments such as basic pay, special and incentive pays, and various allowances. Servicemembers also receive noncash benefits such as health care and access to commissaries and recreational facilities, and may qualify for deferred compensation in the form of retired pay and other retirement benefits. This report provides an overview of military compensation generally, but focuses on cash compensation for current servicemembers. Since the advent of the all-volunteer force in 1973, Congress has used military compensation to improve recruiting, retention, and the overall quality of the force. Congressional interest in sustaining the all-volunteer force during a time of sustained combat operations led to substantial increases in compensation in the decade following the attacks of September 11, 2001. Subsequently, in the earlier part of the 2010s, concerns over government spending generated congressional and executive branch interest in slowing the rate of growth in military compensation. Initiatives to slow compensation growth included presidentially directed increases in basic pay below the rate of increase for the Employment Cost Index (ECI) for 2014-2016 and statutory authority for the Department of Defense (DOD) to reduce Basic Allowance for Housing (BAH) payments by 1 percent of the national average monthly housing cost per year from 2015 to 2019 (for a maximum reduction of 5 percent below the national monthly average housing cost). Some have raised concerns about the impact of personnel costs on the overall defense budget, arguing that they decrease the amount of funds available for modernizing equipment and sustaining readiness.