Order Code RL33446
CRS Report for Congress
Received through the CRS Web
Military Pay and Benefits: Key Questions and
Answers
June 1, 2006
Charles A. Henning
Analyst in National Defense
Foreign Affairs, Defense, and Trade Division
Congressional Research Service { The Library of Congress

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Military Pay and Benefits: Key Questions and Answers
Summary
In the late 1990s, the military services were facing considerable recruiting and
career retention problems. In responding, Congress was mindful of how inadequate
pay had contributed to decreased recruit quality in the late 1970s. It authorized larger
pay raises, increased special pays and bonuses, provided more recruiting resources,
and repealed planned military retired pay reductions for future retirees.
In the midst of these efforts, the terrorist attacks of September 11, 2001, took
place, providing a sense of national unity and military purpose. The 9/11 attacks and
the programmatic changes noted above initially helped recruiting substantially in the
early 2000s. However, the grueling pace of deployments to and from Iraq and
Afghanistan, combined with the dangers of combat, have finally begun to cause long-
anticipated recruiting problems. In 2005, the Army, Army National Guard, and Army
Reserve all fell short of their recruiting goals. Career retention is difficult to measure,
due to the suspended separation and retirement of many personnel since September
11, 2001, but so far retention has been more than satisfactory.
Debate continues over what kinds of pay and benefit increases are best for
improving recruiting and retention. Of particular interest is the balance between
across-the-board pay raises on the one hand, and ones targeted by grade, years of
service, and occupational skill, on the other; and between cash compensation on the
one hand and improvements in benefits such as housing, health care, and installation
services on the other.
The across-the-board increases in military pay discussed each year relate to
military basic pay, which is the one element of military compensation that all military
personnel in the same pay grade and with the same number of years of service
receive. However, numerous other elements are in the total military compensation
“package.” These other elements are important in determining whether a “pay gap”
exists between military and civilian pay that favors civilians, because the numerous
different elements of military pay make it difficult to compare to civilian salaries and
other benefits.
Since the early 1990s, numerous changes in benefits have greatly favored
individual members. These include changes in the cash allowance received by
personnel not living in military housing, a drastic overhaul of military health care,
and repeal of military retired pay cuts first enacted in 1986.
This report replaces Issue Brief IB10089 of the same name. This report will be
updated as needed.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Key Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Why Did the Adequacy of Active Duty Military Pay Become a
Major Issue Beginning in the Late 1990s? . . . . . . . . . . . . . . . . . . . . . . . 1
2. What Kinds of Increases in Military Pay and Benefits Have Been
Considered or Used in the Past? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. How Are Each Year’s Increases in Military Pay Computed? . . . . . . . . . . 3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Annual Percentage Increases in Military Basic Pay . . . . . . . . . . . . . . . . 4
Annual Increases in Basic Allowances for Housing (BAH) and
Subsistence (BAS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. What Have Been the Annual Percentage Increases in Active Duty
Military Basic Pay Since 1993 (FY1994)? What Were Each Year’s
Major Executive and Legislative Branch Proposals and Actions on
the Annual Percentage Increase in Military Basic Pay? . . . . . . . . . . . . . 5
5. Is There a “Pay Gap” Between Military and Civilian Pay, So That
Generally Military Pay Is Less than That of Comparable Civilians?
If So, What Is the Extent of the “Gap”? . . . . . . . . . . . . . . . . . . . . . . . . . 7
Measuring and Confirming a “Gap” . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Estimates of a Military-Civilian Pay Gap . . . . . . . . . . . . . . . . . . . . . . . 9
If There Is a Pay Gap, Does It Necessarily Matter? . . . . . . . . . . . . . . . 10
6. What Benefits Are Specifically Available For Military
Personnel Participating in Operation Iraqi Freedom (OIF) and
Operation Enduring Freedom (OEF — Service in Afghanistan)? . . . . 10
Hostile Fire/Imminent Danger Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Hardship Duty Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Family Separation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Per Diem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Savings Deposit Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Combat Zone Tax Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Rest and Recreation (R&R) for Personnel In OIF/OEF . . . . . . . . . . . . 12
7. What Cash Lump-Sum Death Benefits Are Available to the
Survivors of Military Personnel Killed in Iraq or Afghanistan, and
What Increases in Such Benefits Have Been Proposed? . . . . . . . . . . . 12
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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Military Pay and Benefits: Key Questions
and Answers
Most Recent Developments
As the 109th Congress continues its second session, ongoing military operations
in Iraq and Afghanistan, combined with recruiting challenges, will probably continue
to highlight military pay and benefit issues.
In fact, the Army recently announced that it had missed it’s FY2005 recruiting
goal of 80,000 by 6,627 soldiers. Similar difficulties were experienced by both the
Army National Guard and the Army Reserve for a total Army shortfall of over
24,000. For the remainder of the active component, the Air Force, Navy, and Marine
Corps all met their FY2005 recruiting targets.
Key Questions and Answers
1. Why Did the Adequacy of Active Duty Military Pay Become
a Major Issue Beginning in the Late 1990s?
Since the end of the draft in 1972-1973, the “adequacy” of military pay has
tended to become an issue for Congress for one or both of two reasons: if it appears
that
! the military services are having trouble recruiting enough new
personnel, or keeping sufficient career personnel, of requisite
quality; or
! the standard of living of career personnel is perceived to be less fair
or equitable than that which demographically comparable civilians
(in terms of age, education, skills, responsibilities, and similar
criteria) can maintain.
The first issue is an economic inevitability on at least some occasions. In the
absence of a draft, the services must compete in the labor market for new enlistees
and — a fact often overlooked — have always had to compete in the labor market for
more mature individuals to staff the career force. There are always occasions when
unemployment is low, and hence recruiting is more difficult, and others when
unemployment is high and military service a more attractive alternative. The second
situation, while often triggered by the first, is frequently stated in moral or ethical
terms. From that viewpoint, even if quantitative indexes of recruiting and retention
appear to be satisfactory, it is argued that the crucial character of the military’s

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mission of national defense, and its acceptance of the professional ethic that places
survival below mission accomplishment, demands certain levels of compensation.
Beginning in the mid-1990s, several new factors caused recruiting and retention
problems severe enough to force Congress to once again deal with this issue. Among
the factors cited by analysts were (1) a public impression that the end of the Cold
War, meant that military service was no longer interesting, relevant, or even available
as a career option; (2) the post-Cold War drawdown in active duty military
manpower by 40%, which greatly reduced real and perceived enlistment and career
retention opportunities; (3) the 1990s economic expansion, which led to the
explosive growth of actual and perceived civilian career options; (4) a rise in civilian
consumer living standards against which military families measure their own
economic success or failure; (5) concerns over increased family separation due to
more operations and training away from home, whether “home” was in the United
States or in foreign countries; and (6) a decreased propensity for military service
among young people for other reasons, such as anti-military parents and educators;
skepticism about new missions such as “operations other than war,” “peacekeeping,”
or “peace enforcement”; and the availability of government educational assistance
from other sources (“the GI Bill without the GI”).
2. What Kinds of Increases in Military Pay and Benefits Have
Been Considered or Used in the Past?
Many military compensation analysts have strongly criticized across-the-board
rather than selective pay raises. They argue that across-the-board increases fail to
bring resources to bear where they are most needed. Percentage increases targeted
on particular pay grades and number of years of service (often referred to as “pay
table reform”) and special pays and bonuses targeted on particular occupational
skills, they suggest, would maximize the recruiting and retention gains for the
compensation dollars spent. Across-the-board increases also affect a variety of other
costs; retired pay, for instance, is computed as a percentage of basic pay. (However,
there have been proposals to include special pays and bonuses in retired pay
calculations, precisely to provide an additional incentive for the recipients to stay in
service.)
The services already do a great deal of such targeting, having maintained a large
system of special pays and bonuses since the end of conscription over 30 years ago.
Personnel managers report no indication that such targeted compensation has had the
deleterious effects on morale and cohesion that some had feared. Across-the-board
pay increases, however, are believed by many to have the advantages of simplicity,
visibility, and equity. If everyone gets a similar percentage increase, nobody can feel,
or can claim, that he or she has been left out. It also shows up immediately, in the
person’s next paycheck, rather than months or years later when a particular individual
is next eligible for a lump sum special pay or bonus (some special pays and bonuses
are paid monthly or biweekly, as part of regular pay). It appears certain that, as in
the past, overall increases in military cash compensation over the next several years
will combine both across-the-board and targeted increases. Both of these increases,
because of their broad appeal, may well be the most psychologically sound approach
in improving recruiting and retention as much as possible. In addition, there has been

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bipartisan support voiced for major increases in Montgomery GI Bill benefits,
although these tend to be among the most costly benefit increases being considered.
Recruiting and retention problems are not necessarily solved only by increasing
military pay. Many components of the military compensation system that are
important to recruiting and retention efforts, especially the latter, do not involve cash
pay. These include health care; housing; permanent change of station (PCS) moving
costs and policies; exchanges, commissaries, and other retail facilities; and
recreational facilities. A wide range of views about existing military personnel
management practices suggests that the services’ requirements for both new enlistees
and career people could be significantly reduced by changing often long-standing and
inter-related assignment, promotion, career development, or retirement policies.
Survey research also reveals that the sense of patriotism, public service, and esprit
de corps found in capable and combat-ready armed forces is extremely significant to
both new enlistees and career members.
Furthermore, there are always limits to what increased compensation, whether
cash or in-kind, can do to help any organization cope with personnel difficulties. Job
and career satisfaction; public and elite views of the importance and legitimacy of the
military as an institution; unit morale; success in operational deployments and
especially in combat — these may well be independent of compensation variables.
High “scoring” in these intangibles, especially for a unique organization and culture
like the Armed Forces, can and frequently does balance more tangible problems in
compensation. However, few analysts believe that recruiting and retention rates can
be brought up to service target levels without continuing to maintain the momentum
of recent pay raises, given the need of the services to compete for capable individuals
with the civilian sector. Many long-time observers seem to feel that money alone
cannot keep a person in the military for a full career if the person does not like the
military culture; they assert that the lifestyle is too demanding and too arduous for
most. At the same time, it is argued that people can be driven out of the military if
their compensation and living standards are not at least somewhat close to those of
their demographic and educational counterparts in civilian life.
3. How Are Each Year’s Increases in Military Pay Computed?
Definitions. The across-the-board increases in military pay discussed each
year relate to military basic pay. Basic pay is the one element of military
compensation that all military personnel in the same pay grade and with the same
number of years of service receive. Basic allowance for housing, or BAH, is received
by military personnel not living in military housing, either family housing or
barracks. Basic allowance for subsistence, or BAS, is the cost of meals. All
servicemembers receive BAS but at different rates based on officer or enlisted status.
A federal income tax advantage accrues because the BAH and BAS are not subject
to federal income tax.
Basic pay, BAH, BAS, and the federal income tax advantage all comprise what
is known as Regular Military Compensation (RMC). RMC is that index of military
pay which tends to be used most often in comparing military with civilian
compensation; analyzing the standards of living of military personnel; and studying
military compensation trends over time, or by service geographical area, or skill area.

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Basic pay is between 65% and 75% of RMC, depending on individual circumstances.
RMC specifically excludes all special pays and bonuses, reimbursements, educational
assistance, deferred compensation (i.e., an economic valuation of future retired pay),
or any kind of attempt to estimate the cash value of non-monetary benefits such as
health care or military retail stores.1
Annual Percentage Increases in Military Basic Pay.
Military Basic Pay Raises Linked to Employment Cost Index (ECI)
Percentage Increases. Permanent law (37 USC 1009) provides that monthly
basic pay is to be increased by the annual percentage increase in the Employment
Cost Index (ECI). For fiscal years 2004, 2005, and 2006, the military raise is to be
the ECI increase plus an additional one half percentage point (i.e., if the ECI annual
increase were to be 3.0%, the military raise would be 3.5%). The ECI, calculated by
the Department of Labor’s Bureau of Labor Statistics, measures annual percentage
increases in wages for all private-sector employees, although it can be subdivided to
measure increases in specific categories of such employees. Indexing the annual
military pay raise to the annual increase in the ECI was established by Sec. 602 of the
FY2004 NDAA (P.L. 108-136, November 24, 2003; 117 Stat. 1498, amending 37
USC 1009). Previously, the annual military pay raise was linked to the annual
percentage increases in the General Schedule (GS) federal civil service pay scale.
Congress Usually Passes a Military Pay Raise Anyway, Despite the
Permanent Formula. Despite the existence of this statutory formula, which would
operate each year without any further statutory intervention, Congress has legislated
a particular percentage increase in military pay every year since 1980, with the
exception of 1982. The percentage increase in military pay was usually identical to
that granted GS civilians during the period 1982-1999 (the exceptions were in 1985
and 1994, when Congress provided larger increases in military pay). However,
beginning in 2000, Congress has provided larger increases in military pay each year.
Even when the percentage increase has been identical for both military and civilian
pay, in most cases Congress has explicitly reiterated the increase in law rather than
simply allowing the permanent statutory linkage to operate. Therefore, although
Congress may legislate the pay raise percentage, until recently it was a pro forma
matter, and the operation of the permanent formula remains important in determining
what the percentage will actually be.
Annual Increases in Basic Allowances for Housing (BAH) and
Subsistence (BAS). Housing (37 USC 403) and subsistence (37 USC 402)
allowances are paid to all personnel not living in military housing or eating in
military facilities or using field rations. Monthly BAH varies by rank, by whether the
person has dependents, and, most importantly, by location. BAS is paid at a uniform
rate to all officers and at a uniform but slightly higher rate for all enlisted personnel.
Annual increases in BAH and BAS are both based on surveys of local housing and
national food costs respectively, and thus are not affected by the annual percentage
1 For a detailed discussion of the costs and value of monetary and non-monetary benefits,
see Military Compensation: Balancing Cash and Noncash Benefits, Economic and Budget
Issue Brief, Congressional Budget Office, Jan. 16, 2004.

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increase in the ECI. (For many years BAH and its predecessors and BAS were
subject to the annual percentage increase; this was not changed until the late 1990s.)
There have been occasional proposals to survey the housing costs on which BAH is
based more frequently than once a year, due to rapidly rising housing costs in many
areas of the United States. Particular emphasis is placed by supporters of more
frequent surveys on fast-rising electricity costs, notably for heating and cooling. In
addition, there have been calls to merge BAS with basic pay and reduce the
complexity of military compensation and the need for BAS computations each year.
4. What Have Been the Annual Percentage Increases in
Active Duty Military Basic Pay Since 1993 (FY1994)? What
Were Each Year’s Major Executive and Legislative Branch
Proposals and Actions on the Annual Percentage Increase in
Military Basic Pay?
The following subsections itemize action on the active duty military basic pay
increase going back to 1993 (the FY1994 budget). Unless otherwise noted, all
increases were proposed to be effective on January 1 of the fiscal year indicated.
The same is true of discussions of future pay raises.
2006 (FY2007). Statutory formula: 2.2%. Under current law, the FY2007 pay
raise will be based solely on the ECI and will no longer be a rate 0.5% higher than
the ECI. Therefore, without congressional action, the FY2007 raise will be 2.2%,
effective January 1, 2007. Administration request: 2.2% across the board. According
to DOD officials, the President’s 2007 budget request included $263 million for a
2007 midyear targeted pay raise that would be as high as 8.3 percent for some
warrant officers and range from 2.5 percent for E-5s to 5.5 percent for E-9s.2
2005 (FY2006).
Statutory formula: 3.1%. (0.5% higher than the annual
increase in the Employment Cost Index (ECI) which was 2.6%). Administration
request: 3.1% across-the-board. Final version: 3.1% across the board (Sec 601,
Conference Report on H.R. 1815).
2004 (FY2005). Statutory formula: 3.5%. Administration request: 3.5%
across-the-board. Final version: FY2005 NDAA (Section 601, P.L. 108-375,
October 28, 2004; 118 Stat. 1811), 3.5% across-the-board. [Unlike the years 1999-
2003 (FY2000-FY2004), the Administration did not request and the Congress did not
enact, a “targeted” increase based on which particular pay grades and years-of-service
cohorts need more pay to improve career retention.]
2003 (FY2004). Statutory formula: 3.7%. Administration request: Average
4.1%; minimum 2.0%; maximum of 6.5%. Final version. FY2004 NDAA (Section
601, P.L. 108-136, November 24, 2003; 117 Stat. 1392). Average 4.15%: floor
3.7%; maximum 6.25% for some senior NCOs. Also included language requiring
that after FY2006, the annual military pay raise would be equal to the annual
2 Maze, Rick, “DoD seeks targeted raises of up to 8.3 percent”, Army Times, March 20,
2005.

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percentage rise in the Employment Cost Index (see above, #3, for a description of the
ECI), thus repealing previous law that had the effect of mandating a pay raise equal
to the ECI minus 0.5%. Existing temporary law, enacted in 1999 in the FY2000
NDAA, which required an increase equal to the ECI plus 0.5% during FY2001-
FY2006, was not changed. (See below under “Suspension of Statutory Formula
during FY2001-FY2006.)
2002 (FY2003). Statutory formula: 4.1%. Administration request: Minimum
4.1%; average 4.8%; for some mid-level and senior noncommissioned officers,
warrant officers, and mid-level commissioned officers, between 5.0% and 6.5%.
Final increase: identical to the Administration request, embodied, as usual, in the
FY2003 National Defense Authorization Act (P.L. 107-314, December 2, 2002; 116
Stat. 2458). The House and Senate had also approved the Administration request.
2001 (FY2002). Statutory formula: 4.6%. Administration request: numerous
figures for the “Administration request” were mentioned in the pay raise debate,
depending on when and which agency produced the figures. In general, however,
they all proposed increases of at least 5% and no more than 15% (the latter applying
only to a very few individuals), depending on pay grade and years of service; the
average increase for FY2002 was 6.9%. Final increase: Eventually, the FY2002
National Defense Authorization Act (Section 601, P.L. 107-107, December 28, 2001)
endorsed an “Administration request” of between 5 and 10%, depending on pay
grade and years of service. These increases remain the largest across-the-board
percentage raises since that of FY1982, which took effect on October 1, 1981. The
latter was a 14.3% across-the-board raise, which followed an 11.7% raise the
previous year, FY1981, resulting in a two-year raise of almost 28%. This was
principally in response to the high inflation of the late 1970s.
2000 (FY2001).
Statutory formula: 3.7% (based on the 1999/FY2000
legislation; the original statutory formula would have led to a proposed raise of
2.7%). Administration request: 3.7%.
Final increase: The FY2001 National
Defense Authorization Act (Section 601, P.L. 106-398, October 30, 2000; 114 Stat.
1654A-1 at A-143) approved the 3.7% figure. In addition, as was the case in the
previous year, additional increases averaging 0.4% (based on the size of the across-
the-board raise the amount of money used would have funded; the range of additional
percentage raises was between 1.0 and 5.5%) were provided to middle-grade officer
and enlisted personnel, to be effective July 1, 2001.
1999 (FY2000). Statutory formula: 4.8%. Administration request: 4.4% on
January 1, 2000, but in addition, on July 1, 2000, a wide range of targeted increases
averaging an additional 1.4% (again, based on the size of across-the-board raise the
cost of the targeted increases would finance) in mid-level officer and enlisted grades’
pay levels. Final increase: The FY2000 National Defense Authorization Act
(Section 601, P.L. 106-65; October 5, 1999) raised the January 1, 2000 increase to
4.8%, and accepted the July 1, 2000 targeted increases.
1998 (FY1999). Statutory formula: 3.1%. Administration request: 3.6%. The
House approved 3.6%, or whatever percentage increase was approved for federal GS
civilians, whichever was higher. The Senate approved 3.6%. Final increase: The
FY1999 Strom Thurmond National Defense Authorization Act (Section 601, P.L.

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105-261; October 17, 1998; 112 Stat. 1920 at 2036) approved the House alternative,
which resulted in a 3.6% military increase, as GS civilians also received 3.6%.
1997 (FY1998). Statutory formula: 2.8%. Administration request: 2.8%. Final
increase: FY1998 National Defense Authorization Act (Section 601, P.L. 105-85,
November 18, 1997; 111 Stat. 1629 at 1771): 2.8%.
1996 (FY1997). Statutory formula: 2.3%. Administration request: 3.0%. Final
increase: The House and Senate both approved the higher Administration request of
3.0%, and it was therefore included in the FY1997 National Defense Authorization
Act (Section 601, P.L. 104-201, September 23, 1996; 110 Stat. 2422 at 2539).
1995 (FY1996). Statutory formula: 2.4%. Administration request: 2.4%. Final
increase: Congress also approved 2.4% in the FY1996 National Defense
Authorization Act (Section 601, P.L. 104-106, February 10, 1996; 110 Stat. 186 at
356).
1994 (FY1995). Statutory formula: 2.6%. Administration request: 1.6%; one
percent less than the statutory formula. Final increase: The FY1995 National
Defense Authorization Act (Section 601, P.L. 103-337, October 5, 1994; 108 Stat.
2663 at 2779) authorized the statutory formula figure of 2.6%.
1993 (FY1994). Statutory formula: 2.2%. Administration request: No increase;
military (and civil service) pay would have been frozen in FY1994. The
Administration also proposed limiting future civil service — and hence active duty
military — pay raises to one percentage point less than that provided by the existing
statutory formula. None of these proposals was adopted. Final increase: The
FY1994 National Defense Authorization Act (Section 601, P.L. 103-160, November
30, 1993, 107 Stat. 1547 at 1677) authorized 2.2%.
5. Is There a “Pay Gap” Between Military and Civilian Pay, So
That Generally Military Pay Is Less than That of Comparable
Civilians? If So, What Is the Extent of the “Gap”?
The allegations of a military-civilian “pay gap” beg several questions:
! How can the existence of a gap be determined and the gap be
measured?
! Is there a gap, with civilians or the military being paid more? If so,
how much of a gap?
! If there is a gap, does that in itself require action?
! What are the effects of such a gap?
A wide range of studies over the past several decades has compared military and
civilian (both federal civil service and private sector) compensation. In general, the
markedly different ways in which civilian public and private sector compensation and
benefit systems are structured, compared to that of the armed forces, make it difficult
to validate any across-the-board generalizations about whether there is a “gap”
between military and civilian pay. Some advocates for federal civil servants argue

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that federal civilian pay lags behind private sector pay, which in turn leads some
people, given the linkage between civil service and military pay percentage increases,
to infer that military pay lags behind private sector pay. However, because the
current statistic used to measure private sector pay, the ECI, measures annual
percentage increases and not dollar amounts, no such inference is really possible.
As noted above, the debate, in recent years, over “pay parity” between the
military and federal civil service pay increases, involves the percentage amount of the
civilian pay raise. It has not, so far, involved the military pay raise proposal at all.
The issue has been whether the civil service should get a percentage raise identical
to that of the military, or whether the military should get a higher raise because of (1)
the much greater degree of danger and hardship military service entails, compared to
most civilian employment, especially in time of war, and (2) the need to cope with
actual or forestall potential military recruiting and retention problems.
Measuring and Confirming a “Gap”. It is extremely difficult to find a
common index or indicator to compare the dollar values of military and civilian
compensation. First, military compensation includes numerous separate components,
whose receiving population and taxability varies widely. Which of these, if any,
should be included in a military-civilian pay comparison? Furthermore, total military
compensation includes a wide range of non-monetary benefits: health care, retail
stores, and recreational facilities. Few civilians work in organizations where
analogous benefits are provided. Attempts to facilitate a comparison by assigning a
cash value to non-cash benefits almost always founder on the large number of often
arbitrary assumptions that must be made to generate such an estimate.
Second, it is also extremely difficult to establish a solid comparison between
military ranks and pay grades on the one hand, and civilian jobs on the other. The
range of knowledge, supervision, and professional judgment required of military
personnel and civilians performing similar duties in a standard peacetime industrial
or office milieu may well be similar. When the same military member’s likely job in
the field, possibly in combat, is concerned, comparisons become difficult.
Third, generally speaking, with some exceptions, the conditions of military
service are frequently much more arduous than those of civilian employment, even
in peacetime, for families as well as military personnel themselves. This aspect of
military service is sometimes cited as a rationale for military compensation being at
a higher level than it otherwise might be. On the other hand, the military services all
mention travel and adventure in exotic places as a positive reason for enlistment
and/or a military career, so it may be misleading to automatically assume it is only
a liability.
Fourth, comparisons between different sets of compensation statistics, and the
use of these comparisons to determine what military pay should be, can yield very
different results. Comparing dollar amounts may lead to different conclusions than
comparing the annual increases in pay for each position. The percentage increase in
pay over different time periods is more often than not very different. Different
indexes with different components can be used to determine compensation changes.

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Finally, the level of specificity used in a pay comparison can lead to sharply
differing results, especially when the comparison is between private sector and
federal pay as a whole, both civil service and military. For instance, all Army
colonels may, according to some indexes, be paid roughly as much as federal civil
service GS-15s, or as much as private sector managers with certain responsibilities.
Thus, those occupational specialties that are highly paid in the private sector —
health care, information technology, some other scientific and engineering skills, are
examples — are frequently paid considerably less in the military or in the civil
service. Other common subcategories for comparison, in addition to occupational
skill, include age, gender, years in the labor force, and educational levels.
Estimates of a Military-Civilian Pay Gap. Numerous comparisons of
military and civilian compensation in recent years have been cited to illustrate a gap
that favors civilian pay levels or refutes the existence of such a gap. Many of these
reports lack precision in identifying what aspects of military pay were compared with
civilian pay; what indexes were used to make the comparison, or the length of time
covered by the comparison. Although it is difficult to generalize, it would appear
that most of those estimates which assert that there is a pay gap in favor of higher
civilian pay quote a percentage difference of between 7% and 15% in recent years.
Estimates have been made that question the existence of a gap favoring
civilians. These tend to compare specific populations of military personnel with
equally specific subcategories of civilians. Analyses of this nature appear to be less
common than the across-the-board comparisons, almost certainly because they are
much more difficult to do.3
In 2002, General Accounting Office (GAO) analysts itemized the components
of the military benefit package — such as military retirement, health care,
Servicemembers’ Group Life Insurance; base recreational facilities, and the like —
and compared them with the private sector. It found that the range of benefits
available to military personnel was generally comparable to, and in some cases
superior to, benefits available in the private sector. The GAO study did not appear
to have made dollar-figure comparisons or compared in military non-cash benefits
— such as health care, commissaries or exchanges, or annual leave — with similar
benefits in the private sector, either by figuring out their dollar worth or by itemizing
their exact provisions in great detail.4
Finally, it should be noted that the substantial increases in military pay and
benefits since the late 1990s, whatever the existing relative relationship of military
3 See, for example, Office of the Under Secretary of Defense for Personnel and Readiness.
Report of the Ninth Quadrennial Review of Military Compensation. vol. I. Washington,
Mar. 2002: passim, but especially 29-74, 137-82, 188-89; and Asch, Beth J., and James R.
Hosek. “Military Compensation: Trends and Policy Options,” Documented Briefing. Santa
Monica, CA, RAND Corporation, 1999.
4 U.S. General Accounting Office [now Government Accountability Office], Military
Personnel: Active Duty Benefits Reflect Changing Demographics, but Opportunities Exist
to Improve, GAO-02-935, Sept. 18, 2002.

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to civilian compensation as of that time, have probably had the effect of favoring the
military.
If There Is a Pay Gap, Does It Necessarily Matter? Some have
suggested that the emphasis on a pay gap, whether real or imagined, or if real, how
much, is unwarranted and not a good guide to arriving at sound policy. They argue
that the key issue is, or should be, not comparability of military and civilian
compensation, but the competitiveness of the former. Absent a draft, the armed
forces must compete in the labor market for new enlisted and officer personnel. The
career force by definition has always been a “volunteer force,” and thus has always
had to compete with civilian opportunities, real or perceived. Given these facts, it
is asked what difference it makes whether military pay is much lower, the same, or
higher than that of civilians? If the services are having recruiting difficulties, then
pay increases may be appropriate, even if the existing “gap” favors the military.
Conversely, if military compensation is lower than equivalent civilian pay, and if the
services are doing well in recruiting and retaining sufficient numbers of qualified
personnel, then there may be no reason to raise military pay.
However, some believe that explicitly basing military compensation on “purely
economic” competitiveness with civilian pay could have undesirable consequences:
for instance, in a time of economic difficulty, the military might be receiving lower
pay than most civilians but still recruiting satisfactorily due to high unemployment.
For further discussion of the “pay gap” issue, see Congressional Budget Office,
What Does the Military “Pay Gap” Mean? June 1999; and Association of the U.S.
Army, Closing the Pay Gap, Arlington, VA, October 2000.
6. What Benefits Are Specifically Available For Military
Personnel Participating in Operation Iraqi Freedom (OIF) and
Operation Enduring Freedom (OEF — Service in
Afghanistan)?5
Hostile Fire/Imminent Danger Pay. Many military personnel participating
in OEF and OIF may be eligible for Hostile Fire or Imminent Danger Pay (HF/IDP).
HF/IDP is authorized by 37 USC 310, which provides a special pay for “duty subject
to hostile fire or imminent danger.” While DOD regulations distinguish between
Hostile Fire Pay and Imminent Danger Pay, both are derived from the same statute.
An individual can only collect Hostile Fire Pay or Imminent Danger Pay, not both
simultaneously. The purpose of this pay is to compensate servicemembers for
physical danger. Iraq, Afghanistan, Kuwait, Saudi Arabia, and many other nearby
countries have been declared imminent danger zones. Military personnel serving in
such designated areas are eligible for HF/IDP. To be eligible for this pay in a given
month, a servicemember must have served some time in one of the designated zones,
even if only a day or less. The authorizing statute for HF/IDP sets the rate at $150
5 Much of this material is taken from CRS Report RL31334, Operations Noble Eagle,
Enduring Freedom, and Iraqi Freedom: Questions and Answers about U.S. Military
Personnel, Compensation, and Force Structure, by Lawrence Kapp.

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per month. However, the FY2004 National Defense Authorization Act (NDAA)
(P.L. 108-136, section 619) temporarily increased this rate to $225, through
December 31, 2004. The FY2005 NDAA made this increase permanent. (For some
detailed background on HF/IDP, see CRS Report RS21632, Military Pay:
Controversy Over Hostile Fire/Imminent Danger Pay and Family Separation
Allowance Rates, by Lawrence Knapp.)
Hardship Duty Pay. Military personnel serving in Iraq, Afghanistan, parts
of the Persian Gulf region, and certain nearby areas are also eligible for Hardship
Duty Pay (HDP), authorized by 37 USC 305. It is compensation for the exceptional
demands of certain duty, including unusually demanding mission assignments or
service in areas with extreme climates or austere facilities. The maximum amount
of HDP previously permitted by the statute was$300 per month; this maximum was
increased to $750 per month by the FY2006 NDAA. However, the current rate for
both Iraq and Afghanistan is $100 per month.
Family Separation Allowance. Military personnel participating in OEF and
OIF may also be eligible for Family Separation Allowance (FSA). FSA is authorized
by 37 U.S.C. 427, which provides a special pay for those servicemembers with
dependents who are separated from their families for more than 30 days. The
purpose of this pay is to “partially reimburse, on average, members of the uniformed
services involuntarily separated from their dependents for the reasonable amount of
extra expenses that result from such separation....” To be eligible for this allowance,
U.S. military personnel must be separated from their dependents for 30 continuous
days or more; but once the 30-day threshold has been reached, the allowance is
applied retroactively to the first day of separation. The authorizing statute for FSA
sets the rate at $250 per month.
Per Diem. Military personnel serving in OIF/OEF are also entitled to per diem
payments of $105 per month; the rate is the same for all personnel.
Savings Deposit Program. Another benefit available to those deployed to
Afghanistan, Iraq, and other designated areas nearby is eligibility for the Savings
Deposit Program. This program allows service members to earn a guaranteed rate
of 10% interest on deposits of up to $10,000, which must have been earned in the
designated areas. The deposit is normally returned to the servicemember, with
interest, within 90 days after he or she leaves the eligible region, although earlier
withdrawals can sometimes be made for emergency reasons.
Combat Zone Tax Exclusion. One of the more generous benefits for many
of those serving overseas in OEF or OIF is the “combat zone tax exclusion.”
Afghanistan and the airspace above it have been designated a “combat zone” since
September 19, 2001. Military personnel serving in direct support of the operations
in this combat zone are also eligible for the combat zone tax exclusion. Additionally,
certain areas in the Persian Gulf region — including Iraq — have been designated
combat zones since the 1990-1991 Persian Gulf War. Military personnel serving in
direct support of operations in this combat zone are also eligible for the combat zone
tax exclusion. For enlisted personnel and warrant officers, this means that all
compensation for active military service in a combat zone is free of federal income
tax. For commissioned officers, their compensation is free of federal income tax up

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to the maximum amount of enlisted basic pay plus any imminent danger pay
received. While this benefit applies only to federal income tax, almost all states have
provisions extending the benefit to their state income tax as well.
In addition, military personnel who receive a reenlistment bonus while stationed
in a combat zone do not have to pay federal income tax on any of the bonus. The
amounts involved can be substantial. For example, the Army recently increased
reenlistment bonuses for Special Forces NCOs to a lump sum of $150,000 for a six-
year reenlistment; $75,000 for five years; $50,000 for four years; and $30,000,
$18,000 and $8,000 for three, two, and one year respectively. Other reenlistment
bonuses for a wider range of military occupational specialties have been increased
to up to $50,000 for a five-year commitment.6 The 2006 NDAA boosted the
maximum reenlistment bonus to $90,000.
Rest and Recreation (R&R) for Personnel In OIF/OEF. As has been
widely reported, military personnel serving 12-month tours of duty in Iraq and
Afghanistan are entitled to one 15-day period of “R&R” or home leave in the United
States during their tour. Initially the program was designed to fund the travel of
personnel from either theater of operations to whichever airport in the United States
they landed in, and any further travel within the United States had to be funded by the
individual. However, Congress has since authorized funding of internal travel within
the United States. Reimbursement will be for the military member’s travel; there is
no funding for dependent travel to meet military personnel on R&R. (There has been
some funding of such dependent travel by private charitable organizations.)
7. What Cash Lump-Sum Death Benefits Are Available to the
Survivors of Military Personnel Killed in Iraq or Afghanistan,
and What Increases in Such Benefits Have Been Proposed?
Currently, the survivors (usually spouses or parents) of military personnel who
die while serving in Operations Iraqi Freedom or Enduring Freedom (OIF or OEF)
are entitled to several lump-sum monetary benefits. These include a $100,000 death
gratuity, payable within a few days of the death to assist families in dealing with
immediate expenses; a $255 Social Security lump sum; coverage of burial expenses
up to $6,900 [a Department of Veterans Affairs (VA) benefit]; and Servicemembers’
Group Life Insurance (SGLI) of $400,000 (all servicemembers are automatically
enrolled in this benefit, which is paid for by an approximate $16 monthly deduction
from pay; members may opt out or reduce the coverage, but less than 1% do so).7
6 Tice, Jim. “Critical-skills bonus program is expanding,” Army Times, Mar. 7, 2005, p. 28.
7 The death gratuity and the SGLI maximum amount were raised substantially by the
FY2005 Supplemental Appropriations Act for Defense, the Global War on Terror, and
Tsunami Relief (the “FY2005 Supplemental”)(P.L. 109-13, May 11, 2005; 119 Stat. 231).
The death gratuity was raised from $12,420 to $100,000; and the maximum SGLI coverage
was raised from $250,000 to $400,000 with the first $150,000 provided free for personnel
in a combat zone. Because these increases are in an FY2005 appropriation law, they were
scheduled to expire at the end of FY2005. However, the 2006 NDAA applied the $100,000
death gratuity to all active-duty deaths (not just those that were combat-related) and made
(continued...)

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There are also a wide range of recurring-payment survivor benefits from both DOD
and the VA, as well as non-monetary benefits.8
For more information on military death benefits, see CRS Report RL31334,
Operations Noble Eagle, Enduring Freedom, and Iraqi Freedom: Questions and
Answers about U.S. Military Personnel, Compensation, and Force Structure, by
Lawrence Knapp; and CRS Report RL32783, FY2005 Supplemental Appropriations
for Iraq and Afghanistan, Tsunami Relief, and Other Activities, by Amy Belasco and
Larry Nowels.
For Additional Reading
Army Times, Navy Times, Marine Corps Times, and Air Force Times, weekly issues,
dated Monday of each week.
Uniformed Services Almanac; National Guard Almanac, Reserve Forces Almanac,
Retired Military Almanac. 2005 Editions. Falls Church, VA, Uniformed
Services Almanac, Inc., 2005.
CRS Issue Brief IB93103, Military Medical Care Services: Questions and Answers,
by Richard Best, Jr.
CRS Issue Brief IB85159, Military Retirement: Major Legislative Issues, by Charles
A. Henning.
CRS Report RL31334, Operations Enduring Freedom and Noble Eagle: Questions
and Answers about U.S. Military Personnel, Compensation, and Force
Structure, by Lawrence Knapp.
CRS Report RL30802, Reserve Component Personnel Issues: Questions and
Answers, Lawrence Knapp.
7 (...continued)
the payments retroactive to October 7, 2001. In addition, survivors of service members who
died of non-combat causes on active duty between October 7, 2001 and the date of
enactment of the 2006 NDAA will receive retroactive payments of $150,000. This latter
payment closed an SGLI loophole. SGLI is in the jurisdiction of the Veterans Affairs
Committees, so any action to make the SGLI increases permanent would likely take place
in those committees.
8 For the earlier legislative history of some of these benefits, monetary and non-monetary,
see Office of the Secretary of Defense. Military Compensation Background Papers. Fifth
Edition. September 1996: 615-36; 683-97; and 853-55. A more detailed summary of all
such benefits and a comparison of them with federal civilian and state and local government
survivor benefits is at U.S. Government Accountability Office, Military Personnel: Survivor
Benefits for Servicemembers and Federal, State, and City Government Employees, GAO-04-
814, July 2004.

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