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The Bottom Line - A $28,000 Pay Cap?

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July 10, 2013

By Col. Mike Hayden, USAF (Ret)

Sustaining military pay raises comparable to those of the average American is a fundamental principle of the all-volunteer force, which is celebrating its 40th anniversary. 

However, the administration, in its FY 2014 budget proposal, has proposed capping the currently serving troops’ pay raise for FY 2014 at 1 percent, versus the 1.8-percent raise called for in statute. 

In 2003, Congress codified military pay raises in law tying them to private-sector pay growth as measured by the Bureau of Labor Statistics’ Employment Cost Index (ECI).

Over the past 12 years, Congress worked hard to fix the 13.5-percent pay gap (and resulting retention problems) caused by repeatedly capping military raises below private-sector pay growth in the 1980s and ’90s.

But with the budget woes facing the Pentagon under sequestration, it seems like déjà vu all over. 

As the Defense Authorization Bill moves forward, the two chambers don’t see eye-to-eye on the scheduled pay raise. The House rejected the administration’s pay cap and would allow a 1.8-percent raise, while the Senate supports the cap of 1 percent. 

After all of the pay raises over the past decade that exceeded private-sector growth, some have asked why make a big deal over 0.8 percent. Shouldn’t the military do its fair share? 

History has shown that once Congress starts accepting proposals to cap military pay below private-sector growth, pay caps continue until they have weakened retention and readiness. 

And it appears that is the plan again. In the FY 2013 budget submission, the administration and the Pentagon rolled out a three-year pay-cap plan below ECI starting in FY 2015. The FY 2014 plan looks to either accelerate or extend this cap plan, even though DoD won’t commit one way or the other.

What’s the impact of losing 0.8 percent over a servicemember’s career?

For example, an O-4 with 10 years of service would lose an additional $52 a month in FY 2014 without the 0.8-percent raise.

That might not sound like much, until the power of compounding comes into play.

For the first year, that $52 a month equates to a loss of $624. Over the remaining years of his or her career, the O-4 loses nearly $8,000 in pay from this one-year cap (assuming a 2.5-percent inflation factor). Over his or her retirement, by age 85, that one-year cap costs the servicemember an additional $20,000 in retired pay. 

The grand total loss is roughly $28,000.         

Compound that with several years of pay caps, and this shows just the tip of the pay-cap iceberg. 

The bottom line:  0.8 percent is a big deal. Troops’ pay needs to keep pace with that of the private sector. 

 


Copyright Military Officers Association of America. All rights reserved.

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  • In my not so humble opinion, whenever you present costs in terms of lifetime earnings losses, you are just asking for trouble. It may be a good idea in order to get the constituency mobilized; however, it does not play well to the masses -- the citizens, taxpayers, politicians, etc., who continue to misbelieve that service benefits are too generous. It is disengenous at best. You only need to continue the mantra that our service sacrifice has earned us the benefit as previously promised.

  • What Colonel Hayden neglects to point out is that military pay raises exceeded the Employment Cost Index in ten of the last thirteen years. In three of those years (2008, 2009, 2010) the pay raises were in violation of the statute pegging pay raises to the ECI. Of course, a pay raise in any given year compounds over the course of a career and on into retirement. Thus, the major in Colonel Hayden’s example has not lost $28,000 as claimed in the article; rather he has gained many multiples of that due to Congress’s failure to follow the ECI rule.
    MOAA’s answer to the question, “How much should military pay raises be?” is always, “MORE!!” This is not helpful. As the military prepares to slash endstrength due to budget constraints, it is time for MOAA to join a serious discussion about the tradeoffs between compensation and readiness.

  • I usually don't comment on these but I just have to say, why is it that everything is blamed on Obama? I just don't get it, last I checked there is a congress and a house of representatives, why is it that no one points the finger at them I mean Obama is dammed if he does something and dammed if he doesn't, no one really gives the man a chance, Its always someone looking in the window thinking they know whats going on when really they know nothing. I am not knocking peoples right to their own opinions and their rights to express them but I am sooo tired of everything being about whether you are a republican or a democrat, How about just be American? I have a 5 year old child and I am currently teaching him loyalty and patriotism I tell Him first there is God and Family/Friends, then America, then Texas. but how can I instill pride of his country when all he sees is people complaining and blaming someone else for their problems. I mean I love my raise and don't want to see it go away but I am blaming Obama about it, if anything I blame congress because what I see is everyone making sacrifices because of sequestration but I don't really see the senators and representatives making any.

  • Obama and lue in the west wing came up secrecstation and after no agreemant was reached by the supper commety on the budget in 2011, omaba made it law knowing how it would effect the country and d.o.d. not caring about our security' .
    But obama can waste or tax payers dollars and give aid to his the muslims redicals and contiue to put american on food stamps and other goverment subsistance with no reguard to the true heroes that risk there lifes for our freedomm, robert hicka cwo 4 usmc

  • It is inexcusable to change the law by capping the 2014 military pay raise at 1% as compared with the 1.8% increase in private sector wages. What will be next? How about a cap on military retiree pensions? "Ask not for whom the bell tolls. It tolls for thee."

  • This may,,,,make a few folks mad,,,but our current military is paid very well!! Here on the east cost of Florida, a family of four who have a income of 29K a year, are considered to be paid well... as a thought, this amount of money allows them to apply for FOOD STAMPS!! Question, how much does a PV2 in our military make?!!. A current PV2 makes almost twice as much as I did after 20 years as an 03..with three years in combat, wounded twice...Simply as a thought...I DID NOT do my job for the money...I know,I know,,there may be some thing wrong with me...not too smart? Further question,,how much do our senior officers make...the folks out here don't want to know,,,for their hair will stand on end! Our current military may want to back off,,,just a little? Don't worry,,we will have another war...we seem to do that very well...during which we can once again, rightfully demand more pay....

  • Successive administrations and Congress never seem to learn. One of my instructors use to say, "A wise man learns from the mistakes of others, a smart man learns from his own mistakes, a fool never learns." Our electorate seems to have a penchant for electing fools. If they persist, there will be a repetition of officer resignations, a severe drop in re-enlistments and difficulty in recruiting.

  • I feel that Washington is ruining our country and the lives of its' people. They continue to increase spending without being concerned where it is comming from. We the people loosing benefits they have earmed by serving their country and paying taxes and fees imposed upon them. Very little of the spending goes to support out country.

  • Most Members of Congress direct their efforts working on their re-election, not addressing the needs of the country or the Armed Forces. With 99% of the country blissfully unaware of, and free of, any obligation to serve their country, why are we surprised when Congress follows follows their lead?

    Far too many people, politicians, media, and pundits limit their love of country to waving U.S. flags and buying bumper stickers saying "Support Your Troops" made in China?

  • With all of the thoughts in Hayden's piece and the others who have commented on the president's more than obvious stance and the inability of Congress to act prudently or think beyond themselves, can someone please explain to me just why any veteran would seriously recommend someone consider a military career?

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