Military Pay: Key Questions and Answers
Updated July 17, 2020
Congressional Research Service
https://crsreports.congress.gov
RL33446

Military Pay: Key Questions and Answers

Summary
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 a
more 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% of the national average monthly housing cost per year from 2015 to 2019
(for a maximum reduction of 5% 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. Others argue that robust compensation is essential to maintaining a high-
quality force that is vigorous, well-trained, experienced, and able to function effectively in austere
and volatile environments. The availability of funding to prosecute contingency operations in Iraq
and Afghanistan mitigated the pressure to trade off personnel, readiness, and equipment costs, but
the current budgetary environment appears to have brought these trade-offs to the fore again.
DOD spends about $100,000-$110,000 per year to compensate the average active duty
servicemember—to include cash, benefits, and contributions to retirement programs—although
some estimates of compensation costs are substantially higher. However, gross compensation
figures do not tell the full story, as military compensation relative to civilian compensation is a
key factor in an individual’s decision to join or stay in the military. Thus, the issue of
comparability between military and civilian pay is an often-discussed topic. Some analysts and
advocacy groups have argued that a substantial “pay gap” has existed for decades—with military
personnel earning less than their civilian counterparts—although they generally concede that this
gap is fairly small today. Others argue that the methodology behind this “pay gap” is flawed and
does not provide a suitable estimate of pay comparability. Still others believe that military
personnel, in general, are better compensated than their civilian counterparts. The Department of
Defense takes a different approach to pay comparability. The 9th Quadrennial Review of Military
Compensation (QRMC), published in 2002, argued that compensation for servicemembers should
be around the 70th percentile of wages for civilian employees with similar education and
experience. According to the 11th QRMC, published in 2012, regular military compensation for
officers was at the 83rd percentile of wages for civilian employees with similar education and
experience, and at the 90th percentile for enlisted personnel. A 2018 RAND report concluded that
these overall percentiles were nearly the same in 2016.
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Contacts
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Congressional Research Service

Military Pay: Key Questions and Answers

Introduction
The military compensation system is complex and includes an array of cash compensation
elements, noncash compensation (benefits), deferred compensation (retirement pay, Thrift
Savings Plan, retiree health care, and other retirement benefits), and tax advantages. This report
focuses primarily on the cash compensation provided to members of the active component Armed
Forces.1 Other CRS reports cover military retirement and health care.2
This report uses a question and answer format to highlight key aspects of the military
compensation system and to address topics of recurring congressional interest, including the
following:
 Compensation elements and rates.
 Statutory formulas for increasing compensation elements.
 Historical increases in basic pay.
 Comparability with civilian pay.
 Additional compensation for those serving in Iraq or Afghanistan.
Key Questions and Answers
1. How Are Military Personnel Compensated?
There are three main ways in which military personnel are compensated: cash compensation,
noncash compensation, and deferred compensation.
 Cash compensation takes a variety of forms and includes basic pay, housing and
subsistence allowances, enlistment bonuses, skill proficiency pay, and additional
pay for particularly demanding or dangerous duty.
 Noncash compensation includes various benefits such as medical and dental
care, government-provided housing, educational benefits, space-available travel
on military aircraft, and access to subsidized grocery stores (commissaries), retail
stores (exchanges), and child care centers.3
 The main elements of deferred compensation are retired pay and retiree health
care, but commissary and exchange access, space-available travel, and other
benefits are also part of this. Servicemembers may also participate in the Thrift

1 Unless otherwise specified, the terms “member of the Armed Forces” or “servicemember” in this report refer to
members of the active component. Members of the reserve component receive nearly identical compensation when they
are ordered to active duty for over 30 days, but are compensated somewhat differently when on active duty for 30 days
or less, and much differently when not on active duty. For more information on reserve component compensation see
CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers, by Lawrence Kapp and Barbara
Salazar Torreon.
2 See CRS Report RL34751, Military Retirement: Background and Recent Developments, by Kristy N. Kamarck, and
CRS Report R45399, Military Medical Care: Frequently Asked Questions, by Bryce H. P. Mendez
3 The subsidies vary in type and amount. For example, the commissary system received $1.3 billion in appropriated
funds in FY2019, $1.0 billion in FY2020, and requested $1.1 billion for FY2021. Exchanges do not receive
appropriated funds, but DOD does provide exchanges with certain free services, including building maintenance,
transportation of goods overseas, and utilities at overseas stores. See CRS In Focus IF11089, Defense Primer: Military
Commissaries and Exchanges, by Kristy N. Kamarck and Barbara Salazar Torreon
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Savings Plan (TSP),4 although until 2018 they generally did not receive matching
contributions from the government.5 However, recent changes to the military
retirement system made matching contributions to the Thrift Savings Plan a key
component of many servicemembers’ deferred compensation starting in 2018.6
The basic compensation package provided to all servicemembers includes basic pay, a housing
allowance (or government-provided housing), a subsistence allowance (or government-provided
meals), free medical and dental care for servicemembers, free or low-cost medical and dental care
for dependents, paid annual leave, and certain other benefits. Table 1 summarizes the main
elements of compensation provided to all servicemembers. Servicemembers may also receive
additional cash compensation based on their occupational specialty, duty assignment, and other
factors.
2. What Is Regular Military Compensation (RMC)? How Much Do
Servicemembers Receive in RMC?
When people talk about military pay, they are often only referring to basic pay. Although basic
pay is usually the largest component of cash compensation that a servicemember receives, there
are other types of military pay that increase it significantly. There are tax benefits as well.
Regular Military Compensation is a statutorily defined measure of the cash or in-kind
compensation elements that all servicemembers receive every payday. It is widely used as a basic
measure of military cash compensation levels and for comparisons with civilian salary levels.
Regular Military Compensation (RMC)
RMC, as defined in law, is “the total of the following elements that a member of the uniformed
services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay,
basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing
to the aforementioned allowances because they are not subject to Federal income tax.”7 Though
military compensation is structured much differently than civilian compensation, making
comparison difficult, RMC provides a more complete understanding of the cash compensation
provided to all servicemembers. Therefore, it is usually preferred over simple basic pay when
comparing military with civilian compensation, analyzing the standards of living of military
personnel, or studying military compensation trends over time.

4 The TSP is a defined contribution retirement plan similar to the 401(k) plans provided by many employers in the
private sector.
5 37 U.S.C. §211(d) has authorized TSP matching contributions as a retention incentive since 1999, and as a recruiting
incentive since 2006.
6 For more information on these changes, see CRS Report RL34751, Military Retirement: Background and Recent
Developments, by Kristy N. Kamarck.
7 Statutory definition contained in 37 U.S.C. §101(25).
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Table 1. Major Compensation Elements Provided to All Active Duty Personnel

Statutory
Name
Authority
Purposea
Description
Basic Pay
37 U.S.C.
“Basic pay is the primary means of compensating Provided to al servicemembers. Rate of payment varies based on
203-205,
members of the armed forces for their service
rank and years of service.
1009
to the country. Except during periods of

unauthorized absence, excess leave, and
confinement after an enlistment has expired,
See Basic Pay Rates: https://www.dfas.mil/militarymembers/
every member is entitled to basic pay while on
payentitlements/Pay-Tables.html.
active duty. Basic pay is paid to individual
members on a regular basis; the amount of basic
pay to which a particular member is entitled
depends on the member’s pay grade and length
of service.”
Government-provided housing

The government provides housing to many servicemembers and
or

their families, but the large majority live in civilian housing or in
privatized military housing and receive BAH or OHA.
Basic Allowance for Housing

BAH and OHA “provide a cash allowance to
(BAH)
Servicemembers based in the United States and not provided with
37 U.S.C.
military personnel not provided with
government housing receive BAH; those based outside the United
or
403
government quarters adequate for themselves
and their dependents to enable such personnel
States receive OHA. Rates vary based on servicemember’s rank,
Overseas Housing Allowance
to obtain civilian housing as a substitute.”
location, and whether or not the servicemember has dependents
(OHA)
(see footnote 9 for the definition of “dependent”).
See Basic Allowance for Housing Rates:
http://www.defensetravel.dod.mil/site/bahCalc.cfm.
See Overseas Housing Allowance Rates:
http://www.defensetravel.dod.mil/site/ohaCalc.cfm.
Government-provided meals

“To provide a cash allowance to members of
All servicemembers receive BAS except in limited circumstances
or

the armed forces to defray a portion of the cost
when they are required to eat government-provided meals (e.g.,
of subsistence, such allowance being payable to
enlisted personnel in basic training). The BAS rate varies based on
Basic Allowance for Subsistence
37 U.S.C.
all enlisted and officer personnel, with variations
officer or enlisted status; enlisted receive higher BAS than do
(BAS)
402
to account for the unavailability of adequate
officers.
messing facilities at some duty stations.”
For 2020, the BAS rate is $256.68 per month for officers and
$372.71 for enlisted.
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Statutory
Name
Authority
Purposea
Description
Medical and Dental Care
10 U.S.C.
“To make medical care available to members of
All servicemembers and their family members are eligible for
1071-1110
the uniformed services and their dependents in
medical care under the TRICARE system. This system provides
order to help ensure the availability of physically
free medical and dental care to the servicemember, and free or
acceptable and experienced personnel in time of
low-cost medical and dental care to the servicemember’s
national emergency; to provide incentives for
dependents.
armed forces personnel to undertake military
For more information on this benefit, see CRS Report R45399,
service and remain in that service for a ful
Military Medical Care: Frequently Asked Questions, by Bryce H. P.
career; and to provide military physicians and
Mendez.
dentists exposure to the total spectrum of
demographically diverse morbidity necessary to
support professional training programs and
ensure professional satisfaction for a medical
service career.”
Annual Leave
10 U.S.C.
“To authorize members of the uniformed
All servicemembers are entitled to 30 days of annual leave per
701, 704; 37
services to take a specified number of days of
year (includes leave taken on weekends, holidays, or other regular
U.S.C. 501
leave of absence, or vacation, for rest and
days off). Typically, a maximum of 60 days may be accrued,
relaxation away from their respective duty
although under certain circumstances up to 120 days may be
stations; to allow the accumulation for later use
accrued. Leave in excess of the allowable limit is forfeited at the
of earned leave that cannot be currently used
end of the fiscal year. Under limited circumstances,
because of military, or other, exigencies; and to
servicemembers may receive a cash payment in lieu of their
authorize cash payments as reimbursement for
unused leave (see 37 U.S.C. 501).
accrued leave remaining unused at the
expiration of a member’s term of service.”
Life Insurance
38 U.S.C.
“To make life insurance available to members of
Servicemembers’ Group Life Insurance (SGLI) is available to all
1965-1980
the uniformed services at a reasonable cost.”
servicemembers, though they may opt to not purchase it. Provides
up to $400,000 in life insurance coverage and $100,000 traumatic
injury coverage for the servicemember; up to $100,000 in
coverage for spouse is also available. Servicemembers normally
pay the costs for this coverage, but the government reimburses
the premiums for those serving in an assignment outside the
United States or its possessions in support of a contingency
operation in an area that “has been designated a combat zone” or
“is in direct support of an area that has been designated a combat
zone” (37 U.S.C. 437).
See current SGLI rates: http://benefits.va.gov/insurance/sgli.asp.
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Statutory
Name
Authority
Purposea
Description
Commissary
10 U.S.C.
“To allow items of convenience and necessity—
Subsidized grocery stores on military bases around the world. The
2481-85; 10
especial y items of subsistence—to be made
Defense Commissary Agency estimates average savings of about
U.S.C. 1061-
available for purchase by military personnel at
26% compared to commercial stores, though the savings would be
64
convenient locations and reasonable prices.”
less if compared only to discount chains. For more information on
cost savings, see https://commissaries.com/rewards-and-
savings/patron-savings.

Exchange
10 U.S.C.
“As a military resale and category C revenue-
Retail stores (furniture, electronics, clothing, jewelry, etc.) on
2481
producing morale, welfare, and reaction
military bases around the world. They do not receive direct
[sic](MWR) activity, the armed services
subsidies like commissaries, but do receive some indirect subsidies
exchanges have the dual mission of providing
in the form of waived or reduced costs for utilities, rent, and base
authorized patrons with articles of merchandise
services.
and services and generating nonappropriated
fund (NAF) earnings.”
Source: Congressional Research Service compilation from statutory authorities, Military Compensation Background Papers, government websites, and other data.
a. All entries in the “Purpose” column are taken verbatim from Military Compensation Background Papers, 8th Edition, 2018, https://www.loc.gov/rr/frd/pdf-files/
Military_Comp-2018.pdf.
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Basic Pay
For most servicemembers, basic pay is the largest element of the compensation they receive in
their paycheck and typically accounts for about two-thirds of an individual’s RMC. All members
of the Armed Forces receive basic pay, although the amount varies by pay grade (rank) and years
of service (also called longevity). Table 2 provides illustrative examples of basic pay rates.
Housing
All servicemembers are entitled to either government-provided housing or a housing allowance,
known as basic allowance for housing (BAH) for those living within the United States or
Overseas Housing Allowance (OHA) for those living outside of the United States. Roughly one-
third of servicemembers receive government-provided housing (in the form of barracks,
dormitories, ship berthing, or government-owned family housing), with the remainder receiving
BAH or OHA to offset the costs of the housing they rent or purchase in the civilian economy or
the privatized housing they rent on or near military bases.8
The proportion of housing costs covered by housing allowances has varied over time. See the
section entitled “Basic Allowance for Housing: Increases Are Linked to Increases in Housing
Costs” later in this report for more information on this topic.
The amount of BAH a servicemember receives is based on three factors: paygrade (rank),
geographic location, and whether the servicemember has dependents.9 Paygrade and dependency
status are used to determine the type of accommodation—or “housing profile”—that would be
appropriate for the servicemember (for example, one-bedroom apartment, two-bedroom
townhouse, or three-bedroom single family home). Geographic location is used to determine the
median costs10 associated with each of these housing profiles. The median costs of these housing
profiles are the basis for BAH rates, with some additional adjustments made on the basis of
paygrade (that is, an E-7 without dependents will receive more than an E-6 without dependents,
even though the appropriate housing profile for both of them is “two bedroom apartment”). As a
result of this methodology, BAH rates are much higher in some areas than others, but

8 In mid-1990s, the Department of Defense (DOD) was concerned that the poor quality of government provided
housing on its bases was negatively affecting servicemembers’ morale and readiness. According to a 2018 report from
the Government Accountability Office (GAO), “the DOD estimated that it would need about $20 billion in
appropriated funds and up to 40 years to eliminate the poor quality housing through new construction or renovation
using the traditional military construction approach.” See U.S. Government Accountability Office, DOD Should Take
Steps to Improve Monitoring, Reporting, and Risk Assessment, GAO-18-218, March 2018, p. 1. The FY1996 National
Defense Authorization Act established the Military Housing Privatization Initiative (MHPI). The MHPI allows the
DOD to enter into agreements with private-sector developers to build and renovate military housing, in part through
leasing or transferring land and/or housing units to developers. The developers renovate these units, and in some cases
build new houses, which they subsequently manage. Rental rates for privatized housing are tied to the amount of BAH
a servicemember is authorized. Servicemembers typically sign a lease for a privatized housing unit that includes an
authorization for the property owner to receive rent via a direct allotment from servicemember pay. The Assistant
Secretary of Defense for Sustainment maintains a list of frequently asked questions about MHPI here:
https://www.acq.osd.mil/EIE/FIM/Housing/Housing_FAQs.html.
9 For the purpose of housing allowances, a dependent is defined to include a spouse, unmarried children under 21 (or
older in some circumstances), certain parents dependent on the servicemembers, and certain individuals placed in the
legal custody of the servicemember. See 37 U.S.C. §401 for the complete definition. No distinction is made between a
servicemember with one dependent and a servicemember with multiple dependents. The only distinction is whether or
not the servicemember has dependents.
10 Prior to 2015, BAH rates factored in the average costs of rental housing rates, utilities, and renter’s insurance in a
wide array of housing markets. DOD eliminated the cost of renter’s insurance from the calculation in 2015.
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servicemembers of similar paygrade and dependents status should be able to pay for roughly
comparable housing regardless of their duty location.11 BAH rates are paid to the servicemember
at the specified rate, regardless of the actual housing expenses incurred. Table 2 provides
illustrative examples of how much BAH servicemembers receive annually.
OHA is also based on paygrade, geographic location, and whether the servicemember has
dependents, but the manner in which it is calculated is significantly different than BAH.12 OHA is
paid based on the servicemember’s reported actual housing expenses, up to a maximum amount
that varies by location, plus an allowance for utilities. The amount is reduced if the
servicemember resides with one or more “sharers.”13 There is also a fixed one-time allowance to
cover certain move-in expenses (such as real estate agents’ fees, phone and utility connections,
and security improvements).
Food
Nearly all servicemembers receive a monthly payment to defray their personal food costs.14 This
is known as basic allowance for subsistence (BAS). BAS is provided at a flat rate: In 2020,
enlisted personnel receive $372.71 a month, while officers receive $256.68 a month.15 There have
been calls in the past to merge BAS with basic pay to reduce the complexity of military
compensation and the need for BAS computations each year.

11 For a more detailed description of how BAH rates are calculated, see the Department of Defense’s BAH Primer, at
http://www.defensetravel.dod.mil/Docs/perdiem/BAH-Primer.pdf. For a complete listing of BAH rates, see these
tables: http://www.defensetravel.dod.mil/site/pdcFiles.cfm?dir=/Allowances/BAH/PDF/.
12 According to the Department of Defense Financial Management Regulation (DOD FMR), BAH is “[p]aid for
housing in the United States. The BAH rate is based on median housing costs and is paid independently of a Service
member’s actual housing costs.” OHA is “[p]aid monthly to help offset housing expenses for a Service member or
dependent authorized to live in private-sector leased or owned housing at an assigned overseas location outside the
United States. OHA is based on cost reimbursement. The amount of OHA paid considers factors, such as whether the
housing is shared, the appropriate utilities…and whether the Service member owns or rents the housing.” DOD FMR,
Volume 7A, Chapter 26, Table 26-1, http://comptroller.defense.gov/Portals/45/documents/fmr/current/07a/07a_26.pdf.
13 “Sharers” include other servicemembers authorized OHA, federal civilian employees authorized a Living Quarters
Allowance or Cost of Living Allowance, and other persons (excluding the servicemembers dependents) who contribute
towards the payment of rent, mortgage, and/or utilities. Those involved in a sharing arrangement have their
proportional rent shares determined by dividing the total rent for the dwelling by the number of sharers. See DOD
FMR, Volume 7A, Chapter 26, pages 26-7 and 26-41, http://comptroller.defense.gov/Portals/45/documents/fmr/
current/07a/07a_26.pdf.
14 Those who do not receive BAS—for example, enlisted personnel in basic training—receive government-provided
meals. Historically, enlisted personnel did not receive BAS except in specific circumstances; rather, they were normally
provided free meals in government dining facilities. This changed in 2002. Enlisted personnel now receive BAS except
in limited circumstances. However, if a servicemember receiving BAS elects to eat in a government dining facility, he
or she must pay for the meal. There are also circumstances, such as sea duty and field duty, in which a servicemember
may be required to receive government meals and pay for them (essentially forfeiting their BAS in exchange for
government provided meals). For more information on this topic, see the DOD FMR, Volume 7A, Chapter 25, at
http://comptroller.defense.gov/Portals/45/documents/fmr/current/07a/07a_25.pdf.
15 Enlisted personnel receive a higher BAS than officers. Historically, the federal government always provided enlisted
personnel with meals or a cash allowance to purchase suitable meals, but it did not always take that position with
officers; sometimes they were given a subsistence allowance, sometimes they were expected to pay for their own meals
out of their regular pay. Enlisted BAS, then, has historically been intended to cover the full cost of meals for the
servicemember; officer BAS has not.
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Table 2. Average Regular Military Compensation for Selected Paygrades
(2020 Data; assumes BAH and BAS instead of government quarters and meals)
Estimated
Average
Average
Average
Average
Annual
Annual
Annual
Annual
Federal
Average
Pay
Basic
Housing
Subsistence
Tax
Annual
Grade
Rank
Pay
Allowance
Allowance
Advantage
RMC
E-1
Private (Army and Marine
Corps)
$19,910
$15,249
$4,473
$2,719
$42,350
Seaman Recruit (Navy)
Airman Basic (Air Force)
E-5
Sergeant (Army and Marine
Corps)
Petty Officer Second Class
$37,157
$21,111
$4,473
$5,108
$67,848
(Navy)
Staff Sergeant (Air Force)
E-8
Master Sergeant or First
Sergeant (Army and Marine
Corps)
Senior Chief Petty Officer
$66,273
$25,912
$4,473
$4,501
$101,159
(Navy)
Senior Master Sergeant or First
Sergeant (Air Force)
O-1
Second Lieutenant (Army, Air
Force and Marine Corps)
$40,711
$19,238
$3,080
$4,526
$67,555
Ensign (Navy)
O-4
Major (Army, Air Force and
Marine Corps)
$94,918
$29,903
$3,080
$8,339
$136,240
Lieutenant Commander (Navy)
O-6
Colonel (Army, Air Force and
Marine Corps)
$139,441
$34,107
$3,080
$10,617
$187,244
Captain (Navy)
Source: Department of Defense, Selected Military Compensation Tables, January 1, 2020, B3,
https://militarypay.defense.gov/Portals/3/Documents/Reports/GreenBook%202020.pdf?ver=2020-05-06-170512-
543. For the E-1 data above, CRS used the “ALL E-1” row of the referenced table; for the O-1 data, CRS used
the “O-1” row, which excludes the higher rates for those in paygrade O-1 who formerly served as enlisted
personnel. The tax advantage is computed “using the standard deduction and 2018 tax rates, including the
earned income tax credit.” Actual annual tax advantage of servicemembers wil vary based on their unique tax
situation. Rows may not sum perfectly in the Annual RMC column due to rounding.
Notes: BAH = Basic Allowance for Housing; BAS = Basic Allowance for Subsistence; RMC = Regular Military
Compensation.
Federal Tax Advantage
Certain types of military compensation are not subject to federal income tax, thus generating a tax
benefit for servicemembers. The various types of military pay—basic pay, special pay, and
incentive pay—are considered part of gross income and are usually subject to federal income
tax.16 Military allowances, on the other hand, are generally not considered part of gross income

16 These types of pay are exempt from federal taxation if earned in a combat zone by enlisted personnel and warrant
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and are not subject to federal income tax; nor are the various in-kind benefits of the military—for
example, government housing, health care, fitness centers, and subsidized grocery stores.17, 18
RMC considers only the federal income tax advantage provided by the exemption of BAH and
BAS from gross income. The precise value of the federal tax advantage for an individual
servicemember will vary depending on his or her unique tax situation.
Compensation Elements Not Included in RMC
RMC does not include the full array of compensation elements (e.g., special pays and bonuses,
reimbursements, educational assistance, deferred compensation, or any estimate of the cash value
of nonmonetary benefits such as health care, child care, recreational facilities, commissaries, and
exchanges). As the value of these forms of compensation can be very substantial, RMC should
not be considered a measure of total military compensation.
3. How Are Each Year’s Increases in Basic Pay, BAH, and BAS
Computed?
Mentions of the “military pay raise” are almost always references to the annual increase in basic
pay. The statutory formula for calculating each year’s pay raise is discussed below, but basic pay
is only one element of RMC. BAH and BAS are also subject to periodic adjustment, although
they typically do not receive as much attention as increases in basic pay.
Basic Pay: Increases Are Linked to Increases in the Employment Cost Index
(ECI)
Section 1009 of Title 37 provides a permanent formula for an automatic annual increase in basic
pay that is indexed to the annual increase in the Employment Cost Index (ECI) for “wages and
salaries, private industry workers.” For 2000-2006, the statute required the military raise to be
equal to 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%). For 2007 and onward, the statute

officers; for officers, these types of pay are exempt from federal taxation up to the maximum amount of enlisted basic
pay plus the amount of imminent danger pay.
17 This exemption, which reflects the long-standing exclusion of certain military benefits from gross income, was
codified in the Internal Revenue Code (26 U.S.C. §134) by the Tax Reform Act of 1986 (P.L. 99-514). For a detailed
discussion on these topics, see the Military Compensation Background Papers, 8th edition, pages 169-182 and 873-883,
https://www.loc.gov/rr/frd/pdf-files/Military_Comp-2018.pdf. Table 2 of this IRS publication is also helpful:
http://www.irs.gov/pub/irs-pdf/p3.pdf. The exception to the general nontaxability of allowances is the CONUS Cost of
Living Allowance (COLA), since it was created after the 1986 Tax Reform Act.
18 26 U.S.C. §134 reads, in part, as follows:
§ 134. Certain military benefits.
(a) General rule. Gross income shall not include any qualified military benefit.
(b) Qualified military benefit. For purposes of this section—
(1) In general. The term “qualified military benefit” means any allowance or in-kind benefit (other than personal
use of a vehicle) which—
(A) is received by any member or former member of the uniformed services of the United States or any
dependent of such member by reason of such member’s status or service as a member of such uniformed
services, and
(B) was excludable from gross income on September 9, 1986, under any provision of law, regulation, or
administrative practice which was in effect on such date (other than a provision of this title).
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required the raise be equal to the ECI, although Congress continued to enact increases above the
ECI through 2010.
Under subsection (e) of this statute, the President can specify an alternative pay adjustment that
supersedes the automatic adjustment. President Obama invoked this option with regard to the
2014-2016 pay raises. Additionally, Congress can pass legislation to specify the annual pay raise
which, if enacted, would supersede the automatic adjustment and/or any proposed presidential
adjustment. The frequency of such congressional action is discussed below.
The automatic adjustment under 37 U.S.C. 1009 is tied to the increase in the ECI from the third
quarter of the third preceding year to the third quarter of the second preceding year. For example,
in the 12-month period between the quarter which ended in September 2015 and the quarter
which ended in September 2016, the ECI increased by 2.4%. Hence the pay raise for 2018, as
calculated by the statutory formula, was 2.4%. An illustration of how the formula operates is
provided in Figure 1. This methodology results in a substantial lag between increases in the ECI
and increases in basic pay; the lag appears to be related to the stages of the federal budget
process.19
Figure 1. How Increases in Basic Pay are Calculated under the Statutory Formula
In accordance with 37 U.S.C. 1009(c)(1)

Source: Congressional Research Service.
Congress Has Frequently Waived the Automatic Adjustment and Specified the
Amount of the Military Pay Raise, Although This Has Become Less Common In
Recent Years
Despite the statutory formula, which could operate each year without any further action, Congress
has frequently waived the automatic adjustment and legislated particular percentage increases.
For the pay raises effective in fiscal years 1981 and 1982 and calendar years 1984-2010, 2013,
2017-2018, and 202020 Congress specified the increase that was to take effect in the annual
defense authorization act. Congress specified no percentage increase for 1983, 2011, 2012, 2014-
2016,21 or 2019, thereby allowing the statutory formula or the presidential alternative adjustment

19 In other words, the 2.4% increase described above informed the FY2018 budget request, which was being developed
in the fall of 2016 and submitted to Congress in February of 2017. The FY2018 National Defense Authorization Act
was enacted December 12, 2017, shortly before the day (January 1, 2018) that the 2018 pay raise would go into effect.
20 Increases in basic pay became effective at the start of the calendar year, rather than the fiscal year, in 1984.
21 While not specifying a specific increase for 2015 and 2016, Congress did stipulate in law that for those years there
would be no increase for general and flag officers (those in paygrades O-7 and above) For a listing of increases in basic
pay since 1994, see the later section of this report entitled “4. What Have Been the Annual Percentage Increases in
Basic Pay Over the Past 20 Years? What Were Each Year’s Major Executive and Legislative Branch Proposals and
Actions on the Annual Percentage Increase in Military Basic Pay?”
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to go into effect. The statutory formula is important even when it does not go into effect, as it
provides a benchmark around which alternatives are developed and debated.
Basic Allowance for Housing: Increases Are Linked to Increases in Housing
Costs
Basic Allowance for Housing is paid to servicemembers living in the United States who do not
choose or are not provided government quarters.22 By law, the Secretary of Defense sets the BAH
rates for localities, known as military housing areas (MHAs), throughout the United States.
However, the law requires the Secretary to set the rates “based on the costs of adequate housing
determined for the area” and ties this determination to “the costs of adequate housing for civilians
with comparable income levels in the same area.”23 As increases in BAH are tied to increases in
local housing costs, they are not affected by the annual percentage increase in the ECI. Thus, the
average increase in BAH almost always differs from the increase in basic pay.
To determine the cost of adequate housing, DOD conducts an annual survey of rental costs in
each of the MHAs.24 DOD employs a contractor to collect rental costs for various types of
housing, including apartments, townhouses, and single‐family units of varying bedroom sizes.
Costs for utilities are also collected.25 DOD uses these annual surveys to determine how much
housing costs have increased or decreased in each MHA. If costs in a given MHA increase, it
adjusts BAH rates for that locality upward accordingly at the start of the next calendar year. If
costs in a given MHA decrease, it adjusts the BAH rates downward. However, in the case of a
downward adjustment, a “save pay” provision on the BAH statute prevents the decrease from
applying to individuals currently assigned to that locality: “So long as a member of a uniformed
service retains uninterrupted eligibility to receive a basic allowance for housing within an area of
the United States, the monthly amount of the allowance for the member may not be reduced as a
result of changes in housing costs in the area or the promotion of the member.”26 Thus, only
personnel newly assigned to the area receive the lower payment.
Congress has periodically changed the law with regard to the proportion of housing costs covered
by BAH or its predecessor, known as Basic Allowance for Quarters (BAQ) and Variable Housing
Allowance (VHA).27 DOD estimated that BAQ+VHA covered about 80% of housing costs in

22 Many servicemembers prefer to live off post and elect to receive BAH instead of government quarters; in other cases,
there may not be a sufficient supply of government quarters to house all interested personnel. Those servicemembers
living overseas and not provided with government quarters receive OHA. The adjustment mechanism for OHA is
similar to that of BAH.
23 37 U.S.C. §403(b).
24 For more information on this process, see the Defense Travel Management Office’s “A Primer on the Basic
Allowance for Housing (BAH),” at http://www.defensetravel.dod.mil/Docs/perdiem/BAH-Primer.pdf.
25 DOD eliminated the cost of renter’s insurance from the calculation in 2015.
26 37 U.S.C. §403(b)(6). An analogous provision for OHA is provided in 37 U.S.C. §403(c)(2).
27 From 1980 to 1997, servicemembers not assigned to government quarters received BAQ and, depending on location,
VHA. Congress revised this BAQ+VHA system in 1984 to set BAQ at 65% of the national median housing cost, with
VHA provided when the local median housing cost in a given locality exceeded 80% of the national median housing
cost. Except for those living in lower cost areas where the local median housing cost was below 80% of the national
median housing cost—who therefore only received BAQ—servicemembers were expected to pay 15% of anticipated
housing costs (this rate was also known as absorption or out-of-pocket). However, in subsequent years, congressionally
approved increases to BAQ and VHA did not keep up with increases in civilian housing costs. Dissatisfaction with the
BAQ+VHA system, including the persistent disparity between intended and actual out-of-pocket expenses, led
Congress to replace it with BAH in 1997.
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1996.28 In 1997, Congress replaced BAQ+VHA with BAH, and subsequently raised BAH rates so
that they covered 100% of the cost of adequate housing by 2005.29
More recently, the FY2015 National Defense Authorization Act allowed the Secretary of Defense
to reduce BAH payments by 1% of the national average monthly housing cost,30 and the FY2016
National Defense Authorization Act extended this authority, authorizing an additional 1%
reduction per year through 2019 (for a maximum reduction of 5% under the national monthly
average housing cost).31 DOD has indicated that a save pay provision, discussed above, will apply
to these changes.32
Basic Allowance for Subsistence: Increases Are Linked to Increases in Food
Costs
BAS is paid at a uniform rate to all eligible enlisted personnel, and at a uniform but lower rate for
all eligible officers. By law, BAS is adjusted each year according to a formula that is linked to
changes in food prices. The increase is identical to “the percentage increase in the monthly cost of
a liberal food plan for a male in the United States who is between 20 and 50 years of age over the
preceding fiscal year, as determined by the Secretary of Agriculture each October 1.”33
4. What Have Been the Annual Percentage Increases in Basic Pay
Over the Past 20 Years? 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 basic pay increase going back to 1997. Unless
otherwise noted, all increases were proposed to be effective on January 1 of the year indicated in
bold. The public law number for each year’s National Defense Authorization Act is included at
the end of each section below, even for those years in which there was no statutory language
relevant to the pay raise.

28 “In creating the BAQ and the Variable Housing Allowance (VHA) [the predecessors to BAH], Congress intended to
cover 85 percent of service members’ housing costs. In reality though, housing allowances only covered approximately
80 percent of service members’ total housing expenses in 1996. In an effort to close that gap, the Department funded a
3.0 percent increase in housing allowances in 1997, and Congress added an additional 1.6 percent. This will lower out-
of-pocket housing costs to approximately 19% percent of a service member’s total costs, the lowest percentage since
before 1987.” Testimony of Fred Pang, Assistant Secretary of Defense for Force Management Policy, before the House
National Security Committee, Military Personnel Subcommittee, March 14, 1997.
29 For more information on this topic, see Department of Defense, Military Compensation Background Papers, Eighth
Edition, Washington, DC, July 2018, p. 136-139, https://www.loc.gov/rr/frd/pdf-files/Military_Comp-2018.pdf.
30 Also, starting in 2015, the Department of Defense decided it would no longer consider renter’s insurance in BAH
calculations. This change effectively reduced BAH rates by an additional 1%.
31 P.L. 113-291, §604 and P.L. 114-92, §603.
32 “An integral part of the Basic Allowance for Housing program is the provision of individual rate protection to all
members. No matter what happens to measured housing costs—including the out-of-pocket cost sharing adjustment
noted above, an individual member who maintains uninterrupted Basic Allowance for Housing eligibility in a given
location will not see his/her Basic Allowance for Housing rate decrease. This ensures that members who have made
long-term commitments in the form of a lease or contract are not penalized if the area’s housing costs decrease.” DOD
News Release, “DoD Releases 2016 Basic Allowance for Housing Rates,” http://www.defense.gov/News/News-
Releases/News-Release-View/Article/636341/dod-releases-2016-basic-allowance-for-housing-rates.
33 37 U.S.C. §402(b)(1)(B).
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For a table that summarizes recent increases in basic pay, see CRS In Focus IF10260, Defense
Primer: Military Pay Raise, by Lawrence Kapp.
2020. Statutory Formula: 3.1%. Administration request: 3.1%. Section 606 of the House-passed
version of the National Defense Authorization Act (NDAA) for FY2020, H.R. 2500, supported a
3.1% increase in basic pay. Section 607 of the House bill would have directed that the statutory
formula of 37 U.S.C. §1009 take effect, also resulting in a 3.1% increase in basic pay. The
Senate-passed version of the FY2020 NDAA contained no provision to specify the rate of
increase in basic pay. Section 609 of the enacted version of the National Defense Authorization
Act for Fiscal Year 2020 (P.L. 116-92) specified a 3.1% increase in basic pay effective January 1,
2020. Final increase: 3.1% across-the-board.
2019. Statutory Formula: 2.6%. Administration request: 2.6%. The House-passed version of the
FY2019 NDAA contained no provision to specify the rate of increase in basic pay. Section 601 of
the Senate-passed version of the FY2019 NDAA would have waived the automatic increase in
basic pay under the statutory formula of 37 U.S.C. §1009, and set the pay raise at 2.6%. The John
S. McCain National Defense Authorization Act for FY 2019 (P.L. 115-232) contained no
provision relating to a general increase in basic pay, thereby leaving the automatic adjustment of
37 U.S.C. 1009 in place. Final increase: 2.6% across-the-board.
2018. Statutory Formula: 2.4%. Administration request: 2.1%. Section 601 of the House-passed
version of the FY2018 NDAA would have required the statutory formula increase (2.4%) to go
into effect, “notwithstanding any determination made by the President under subsection (e) of
such section with respect to an alternative pay adjustment.... ” Section 601 of the Senate-passed
version of the FY2018 NDAA would have waived the automatic increase in basic pay under the
statutory formula of 37 U.S.C. §1009, and set the pay raise at 2.1%. On August 31, 2017,
President Trump sent a letter to congressional leaders invoking his authority under 37 U.S.C.
1009(e) to set the pay raise at 2.1%. However, Section 601 of the enacted version of the FY2018
NDAA (P.L. 115-91) specified the statutory formula increase (2.4%) would go into effect,
superseding the President’s alternative adjustment. Therefore, basic pay for all servicemembers
increased by 2.4% on January 1, 2018. Final increase: 2.4% across-the-board (P.L. 115-91).
2017. Statutory Formula: 2.1%. Administration request: 1.6%. Section 601 of the House version
of the FY2017 NDAA (H.R. 4909) would have required the statutory formula increase (2.1%) to
go into effect, “notwithstanding any determination made by the President under subsection (e) of
such section with respect to an alternative pay adjustment.... ” Section 601 of the Senate version
of the FY2017 NDAA (S. 2943) would have waived the automatic increase in basic pay under the
statutory formula of 37 U.S.C. §1009, and set the pay raise at 1.6%. On August 31, 2016, the
President sent a letter to congressional leaders invoking his authority under 37 U.S.C. 1009(e) to
set the pay raise at 1.6%. However, Section 601 of the final version of the FY2017 NDAA set the
pay raise at 2.1%, and President Obama signed this bill into law on December 23, 2016. This
statutory adjustment supplanted the President’s alternative pay adjustment. Therefore, basic pay
for all servicemembers increased by 2.1% on January 1, 2017. Final increase: 2.1% across-the-
board (P.L. 114-328).
2016. Statutory Formula: 2.3%. Administration request: 1.3%. The House version of the FY2016
NDAA (H.R. 1735) contained no provision to specify the rate of increase in basic pay, although
the report accompanying it stated that the committee supported a 2.3% increase. The Senate
version (H.R. 1735) contained a provision that would have waived the automatic adjustment of 37
U.S.C. §1009 and set the pay increase at 1.3%, but excluded generals and admirals. On August
28, the President exercised his authority to specify an alternative adjustment, setting the increase
at 1.3%. No general pay raise provision was included in the final version of the NDAA, thereby
leaving in place the 1.3% increase specified by President Obama. However, Section 601 of the
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FY2016 NDAA prevented the pay increase from applying to generals and admirals. Final
increase: 1.3% across-the-board, excluding generals and admirals (P.L. 114-92).
2015. Statutory Formula: 1.8%. Administration request: 1.0%. The House version of the FY2015
NDAA contained no statutory provision to specify the rate of increase in basic pay, although the
report accompanying it stated that the committee supported a 1.8% increase; it also included a
provision to prevent general and flag officers from receiving any increase in basic pay in 2015.
The Senate committee-reported version contained a provision that would have waived the
automatic adjustment of 37 U.S.C. 1009 and setting the pay increase at 1.0% for servicemembers,
but excluded generals and admirals. On August 29, President Obama sent a letter to Congress
invoking 37 U.S.C. 1009(e) to set the pay raise for 2015 at 1.0%. No general pay raise provision
was included in the final version of the NDAA, thereby leaving in place the 1.0% increase
specified by President Obama. However, Section 601 of the FY2015 NDAA prevented the pay
increase from applying to generals and admirals. Final increase: 1% across-the-board, excluding
generals and admirals (P.L. 113-291).
2014. Statutory Formula: 1.8%. Administration request: 1.0%. The House version of the FY2014
NDAA contained no provision to specify the rate of increase in basic pay, while the Senate
committee-reported bill specified an increase of 1.0%. On August 30, President Obama sent a
letter to Congress invoking 37 U.S.C. 1009(e) to set the pay raise for 2014 at 1.0%. No provision
was included in the final version of the NDAA, thereby leaving in place the 1.0% increase
specified by the President. Final increase: 1% across-the-board (P.L. 113-66).
2013. Statutory Formula: 1.7%. Administration request: 1.7%. The House version of the FY2013
NDAA supported a 1.7% across-the-board pay raise. The Senate bill contained no statutory
language. The final bill specified a 1.7% increase. Final increase: 1.7% across-the-board (P.L.
112-239).
2012. Statutory Formula: 1.6%. Administration request: 1.6%. The House version of the FY2012
NDAA supported a 1.6% across-the-board pay raise, equal to the ECI. Both the Senate-reported
bill and the final version were silent on the pay raise issue. As a result, the statutory formula
became operative with an automatic January 1, 2012, across-the-board raise equal to 1.6%. Final
increase: 1.6% across-the-board (P.L. 112-81).
2011. Statutory formula: 1.4%. Administration request: 1.4%. The House version of the FY2011
NDAA supported a 1.9% across-the-board pay raise, 0.5% above the ECI. Both the Senate-
reported bill and the final bill were silent on the pay raise issue. As a result, the statutory formula
became operative with an automatic across-the-board raise of 1.4%; equal to the ECI. Final
increase: 1.4% across-the-board (P.L. 111-383).
2010. Statutory formula: 2.9%. Administration request: 2.9%. The FY2010 NDAA specified a
3.4% increase. Final increase: 3.4% across-the-board (P.L. 111-84).
2009. Statutory formula: 3.4%. Administration request: 3.4%. The FY2009 NDAA specified a
3.9% increase. Final increase: 3.9% across-the-board (P.L. 110-417).
2008. Statutory formula: 3.0%. Administration request: 3.0% across-the-board. The presidential
veto of the initial FY2008 NDAA resulted in a 3.0% pay raise taking effect on January 1, 2008
(statutory formula). The final version of the NDAA, signed into law on January 28, specified that
basic pay be increased by 3.5% retroactive to January 1. Final increase: 3.5% across-the-board
(P.L. 110-181).
2007. Statutory formula: 2.2%. The statutory formula for 2007 was based solely on the ECI and
not a rate 0.5% higher than the ECI that had been specified for 2000-2006. Administration
request: 2.2%. The NDAA specified a minimum 2.2% increase, with greater increases for certain
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pay cells.34 Final increase: 2.2% across-the-board but with an additional April 1, 2007, targeted
pay raise that would be as high as 8.3% for some warrant officers and range from 2.5% for E-5s
to 5.5% for E-9s35 (P.L. 109-364).
2006. Statutory formula: 3.1%. Administration request: 3.1% across-the-board. The NDAA
specified a 3.1% increase. Final increase: 3.1% across-the-board (P.L. 109-163).
2005. Statutory formula: 3.5%. Administration request: 3.5%. The NDAA specified a 3.5%
increase. Final increase: 3.5% across-the-board (P.L. 108-375).
2004. Statutory formula: 3.7%. Administration request: Average 4.1%; minimum 2.0%;
maximum of 6.5%. The NDAA specified a 3.7% minimum increase, with greater increases for
certain pay cells. Final increase: 3.7% minimum, 4.15% average, 6.25% maximum for some
senior NCOs (P.L. 108-136).
2003. Statutory formula: 4.1%. Administration request: minimum 4.1%; average 4.8%; between
5.0% and 6.5% for some mid-level and senior noncommissioned officers, warrant officers, and
mid-level commissioned officers. The NDAA specified increases identical to the Administration
request. Final increase: Identical to the Administration request (P.L. 107-314).
2002. 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 was 6.9%. The NDAA specified a 5% minimum increase, with greater
increases for certain pay cells. Final increase: Between 5 and 10%, depending on pay grade and
years of service (P.L. 107-107).36
2001. Statutory formula: 3.7%. Administration request: 3.7%. The FY2001 NDAA specified a
3.7% minimum increase of 3.7%, with greater increases for certain pay cells. The NDAA
specified a 3.7% minimum increase, with greater increases for certain pay cells. Final increase:
3.7% across-the-board, effective January 1, 2001, plus additional raises of between 1.0 and 5.5%
for mid-grade officer and enlisted personnel, to be effective July 1, 2001 (P.L. 106-398).
2000. Statutory formula: 4.8% (based on the change to the statutory formula; the original
statutory formula would have led to a proposed raise of 3.8%). Administration request: 4.4% on
January 1, 2000, plus increases averaging an additional 1.4% for mid-grade officer and enlisted
personnel, effective July 1, 2000. The NDAA specified a 4.8% minimum increase, with greater
increases for certain pay cells. Final increase: 4.8% on January 1, 2000, plus increases averaging
an additional 1.4% for mid-grade officer and enlisted personnel, effective July 1, 2000 (P.L. 106-
65).
1999. 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%. The final version accepted the House provision. Final increase: 3.6%, as
GS civilians also received 3.6% (P.L. 105-261).

34 The basic pay table is made up of various pay cells for specified combinations of pay grade and years of service.
35 Maze, Rick, “DoD seeks targeted raises of up to 8.3 percent,” Army Times, March 20, 2005.
36 The 2002 increase remains 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.
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5. What Is an “Adequate” Level of Military Pay?
Since the end of the draft in 1973, the “adequacy” of military pay has tended to become an issue
for Congress 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 of demographically comparable civilians (in terms of age, education,
skills, responsibilities, and similar criteria).
The first issue is an economic inevitability in some periods. In the absence of a draft, the services
must compete in the labor market for new military personnel, and—a fact often overlooked—
have always had to compete in the labor market to retain the more experienced individuals who
make up the career force.37 When unemployment is low, employment opportunities in the civilian
world abound and military recruiting is more difficult. When unemployment is high, military
service becomes a more attractive alternative, and military recruiting is easier.
From 2010 to 2017, recruiting and retention in the Armed Forces were quite strong, hence
weakening the case for compensation increases based on competition with the civilian economy
and generating discussion of possible compensation cuts and/or restructuring. However, the
strong recruiting and retention results in those years were due in part to a civilian economy still
recovering from recession and to force reductions in the Air Force, Marine Corps, and Army,
which generated lower recruiting and retention goals. Congress approved active duty end-strength
increases for all four Services in FY2018. Subsequently, the Army did not meet its FY2018
recruiting goal38 and senior defense officials have testified that a strong economy had made it
more challenging for them to recruit new personnel.39 If recruiting problems were to become

37 Unlike civilian enterprises, the military services generally do not recruit mid- or senior-level personnel from outside
the existing military workforce. Rather, they rely on promotions from within to fill these positions.
38 The FY2018 NDAA approved an active duty end-strength of 483,500 for the Army. The Army fell short of this
objective, ending FY2018 with a strength of 476,179 (nearly the same as its FY2017 end-strength of 476,245). The
Army attributes its inability to meet the end-strength objective primarily to a shortfall in enlisted recruits: the Army set
a goal of 76,500 new enlisted recruits (also referred to as non-prior service accessions) but brought in 69,972. The
FY2019 NDAA authorized an active duty end-strength of 487,000 for the Army, but in its FY2020 budget request
(submitted in March 2019), the Army proposed a revised end-strength goal: “Given the FY 2018 end strength outcome
and a challenging labor market for military recruiting, the Army Active Component has decided to pursue a new end
strength growth ramp. The Army has shifted to a more modest end strength growth ramp of 2,000 Soldiers per year,
with end strength targets of 478,000 in FY 2019 and 480,000 in FY 2020.” Despite a similarly challenging labor
market, the Air Force was able to increase its active duty strength in FY2018 by about 3,000 (322,787 on September
30, 2017 vs. 325,880 on September 30, 2018) and the Navy increased by about 6,000 (323,933 on September 30, 2017
vs. 329,851 on September 30, 2018).
39 See for example, U.S. Congress, House Committee on Appropriations, Subcommittee on Defense, Army Fiscal 2020
Budget Request, 116th Cong., April 9, 2019, testimony of the Honorable Mark Esper, Secretary of the Army (“…we
face a difficult recruiting environment…you're doing it in a country that is facing one of the lowest unemployment rates
in decades and American population is increasingly isolated form the Army that serves it.”) and U.S. Congress, Senate
Committee on Armed Services, Subcommittee on Personnel, Military Personnel Policies and Military Family
Readiness, 116th Cong., 1st sess., February 27, 2019, Statement of Vice Admiral Robert P. Burke, Chief of Naval
Personnel (“Under good economic conditions, America’s youth have more options at their disposal, challenging Navy’s
ability to meet recruiting requirements as potential candidates explore alternative employment opportunities. This past
year, the U.S. economy experienced its strongest growth since the recession of 2008, resulting in significant expansion
of employment opportunity in an ever-tightening labor market.”) Other factors that can affect recruiting and retention
include the level of resources allocated to recruiting and retention and attitudes about military career prospects and job
satisfaction. For more information on the recruiting and retention issues of the 1990s, see CRS Report RL31297,
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more widespread, increased advocacy for compensation increases could well occur. All of the
Services met their FY2019 enlisted recruiting goals.40
The second situation is frequently stated in moral or ethical terms. Proponents of this viewpoint
argue that, even if quantitative indexes of recruiting and retention appear to be satisfactory, the
crucial character of the military’s mission of national defense, and its acceptance of the
professional ethic that places mission accomplishment above survival, demands certain enhanced
levels of compensation. However, the compensation increases that occurred in the 2000s have led
many analysts to conclude that military compensation is currently quite robust in comparison to
civilian counterparts.
6. Is There a “Pay Gap” Between Military and Civilian Pay? Do
Military Personnel Make More or Less Than Their Civilian
Counterparts?
The issue of a military-civilian “pay gap” raises several additional questions:
 How can the existence of a gap be determined and the gap be measured?
 Is there a gap and, if so, are civilians or military personnel being paid more? How
much more?
 If there is a gap, does that in itself require action?
A wide range of studies over the past several decades have attempted to compare 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 those of the Armed Forces, make it difficult to validate any
generalizations about whether there is a “gap” between military and civilian pay.41
Measuring and Confirming a “Gap”
It is 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 vary widely. Which of these, if any, should be included
in a military-civilian pay comparison? Furthermore, total military compensation includes a wide
range of noncash benefits—health care, commissary access, recreational facilities—as well as a
unique deferred compensation package. Few civilians work in organizations where analogous
benefits are provided. Attempts to facilitate a comparison by assigning a cash value to noncash
benefits almost always founder on the large number of debatable assumptions that must be made
to generate such an estimate.

Recruiting and Retention in the Active Component Military: Are There Problems?, by Lawrence Kapp.
40 However, the Army’s FY2019 goal was substantially lower than its FY2018 goal. For more information on enlisted
recruiting rates, see CRS In Focus IF11147, Defense Primer: Active Duty Enlisted Recruiting, by Lawrence Kapp.
41 Some advocates for federal civil servants argue that federal civilian pay lags behind private sector pay, which in turn
leads some people to infer that military pay lags behind private sector pay (given the past linkage between civil service
and military basic pay percentage increases). A separate debate, more common about a decade ago, was over “pay
parity” between the percentage increases in military basic pay and federal civil service pay. 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.
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Second, it is also difficult to establish a 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 be roughly equivalent. However, when the same
military member’s job in the field and in combat is concerned, comparisons become difficult.
Third, generally speaking, 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 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 that this is always a liability.
Thus, it can be difficult to make direct comparisons between military and civilian occupations. As
noted by the Congressional Budget Office:42
Comparing compensation in the military and civilian sectors can be problematic. One
obvious limitation is that such comparisons cannot easily account for different job
characteristics. Many military jobs are more hazardous, require frequent moves, and are
less flexible than civilian jobs in the same field. Members of the armed forces are subject
to military discipline, are considered to be on duty at all times, and are unable to resign,
change jobs at will or negotiate pay. Military personnel also receive extensive training,
paid for by the government. Family support programs are generally more available in the
military compared with civilian employers. Intangible rewards, such as a shared sense of
purpose, may be higher among military personnel as well. Quantifying those elements
among military and civilian personnel is extremely difficult.
Fourth, differing methodologies for calculating compensation can yield different results. For
example, comparing the percentage increase in pay over different time periods can produce
widely varying rates of increase. Likewise, when indexes of compensation include different
elements (for example, basic pay versus RMC), the results will typically diverge as well.
Finally, the level of specificity used in a pay comparison can lead to differing results, especially
when the comparison is between private sector and federal pay, both civil service and military.
For instance, 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.
However, if the pay comparisons focus on those occupational specialties that are highly paid in
the private sector—health care, information technology, and some other scientific and
engineering skills are examples—the comparison may not be as favorable. Other common
subcategories for comparison—such as age, gender, years in the labor force, and educational
levels—can also produce differing results.
Estimates of a Military-Civilian Pay Gap
Various comparisons of military and civilian compensation exist which illustrate a gap that favors
civilian pay levels, refute the existence of such a gap, or show that the pay gap favors the military.
Some of these reports lack precision in identifying what aspects of military pay were compared
with civilian pay, which indexes were used to make the comparison, or the length of time covered
by the comparison.
One method of estimation, which indicates there is a pay gap in favor of civilians, asserts that
rough pay parity existed between civilian and military personnel in 1982, but that increases since

42 “Evaluating Military Compensation”, Congressional Budget Office, June, 2007, p. 2.
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then in military basic pay have generally not kept up with increases in civilian pay (as measured
by the ECI).43 As a result, a pay gap of about 13% in 1999 was gradually eliminated by 2011 due
to above-ECI increases in basic pay. It reappeared in 2014 with military pay estimated to be 2.6%
lower than civilian pay in 2020.44
However, using the same starting date (1982) but considering RMC rather than just basic pay, the
Congressional Budget Office (CBO) came to a much different conclusion in 2010. In
congressional testimony, a CBO analyst answered the question “Is there a ‘gap’ between civilian
and military pay raises over the past few decades,” as follows:
The answer depends on how narrowly military cash pay is defined. One common method
of comparison is to calculate the cumulative difference between increases in military and
civilian pay using military basic pay, a narrow measure of cash compensation that does not
include, for example, tax-free allowances for housing and food. Applying that method
would indicate that cumulatively, civilian pay rose by about 2 percent more than military
pay between 1982 and the beginning of 2010. But that measure does not encompass the
full scope of military cash compensation. Using a broader measure that includes cash
allowances for housing and food indicates that the cumulative increase in military
compensation has exceeded the cumulative increase in private-sector wages and salaries
by 11 percent since 1982. That comparison excludes the value of noncash and deferred
benefits, which would probably add to the cumulative difference, because benefits such as
military health care have expanded more rapidly than corresponding benefits in the private
sector.45
Another approach to estimating a pay gap attempts to compare actual compensation levels of
military personnel to civilians with similar education and experience, rather than comparing rates
of compensation increase over time. For example, the 9th Quadrennial Review of Military
Compensation (QRMC), published in 2002, compared the RMC of junior enlisted personnel to
the earnings of civilian high school graduates, middle grade NCOs with civilians with some
college education, and senior enlisted personnel with civilians who are college graduates. It
compared the RMC of officers to the earnings of civilians with bachelors or advanced degrees in
professional or managerial occupations. Based on a separate body of research, it argued that “pay
at around the 70th percentile of comparably educated civilians has been necessary to enable the
military to recruit and retain the quantity and quality of personnel it requires”46 and pointed out
those groups of military personnel that fell short of this compensation goal. Congress approved
several rounds of pay table reform to address situations where servicemembers fell below the
70% mark. Additionally, general increases in basic pay higher than the rate of increase in the ECI
(2000-2010) and the elimination of “out-of-pocket” housing expenses by 2005 pushed

43 See, for example, Military Officers Association of America (MOAA), “Military Pay Comparability,”
http://takeaction.moaa.org/military_pay
44 MOAA estimated the pay gap using this methodology to be 2.6% in 2018. See “MOAA’s 2019 Key Goals: Keep
Pace with Private-Sector Pay,” Military Officer’s Association, December 20, 2018,
https://www.moaa.org/content/publications-and-media/news-articles/2018-news-articles/advocacy/MOAA-s-2019-
Key-Goals--Keep-Pace-with-Private-Sector-Pay/. In 2019 and 2020, the increase in basic pay matched the increase in
ECI, thus leaving this estimate unchanged.
45 Statement of Carla Tighe Murray, Senior Analyst for Military Compensation and Health Care, before the
Subcommittee on Personnel Committee on Armed Services, U.S. Senate, “Evaluating Military Compensation,” April
28, 2010, p. 2, http://www.cbo.gov/sites/default/files/04-28-MilitaryPay.pdf.
46 Department of Defense, 9th Quadrennial Review of Military Compensation, March 2002, p. xxiii,
http://militarypay.defense.gov/Portals/3/Documents/Reports/9th_QRMC_Report_Volumes_I_-_V.pdf.
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servicemember RMC up substantially in relation to civilian compensation. According to the 11th
QRMC, by 2009 military compensation had substantially exceeded this goal:
In 2009, average RMC for enlisted members exceeded the median wage for civilians in
each relevant comparison group—those with a high school diploma, those with some
college, and those with an associate’s degree. Average RMC for the enlisted force
corresponded to the 90th percentile of wages for civilians from the combined comparison
groups. For officers, average RMC exceeded wages for civilians with a bachelor’s or
graduate-level degree. Average RMC for the officer force corresponded to the 83rd
percentile of wages for the combined civilian comparison groups.47
Since that time, Congress and the executive branch have made efforts to slow the growth of
military compensation. Recent initiatives have included presidentially directed increases in basic
pay below the ECI for 2014-2016 and statutory authority for DOD to reduce BAH payments by
1% of the national average monthly housing cost per year from 2015 to 2019 (for a maximum
reduction of 5% of the national monthly average housing cost).
In 2018, RAND published a report that compared RMC in 2016 to civilian pay levels, and
compared those results to those generated by the 11th QRMC in 2009. Using a similar, though not
identical, methodology the RAND report found that RMC had remained well above the 70th
percentile of comparability educated civilians:
The 11th QRMC, using 2009 data, placed RMC at the 90th percentile of civilian pay for
enlisted and the 83rd for officers. Our percentiles for 2016—the 84th for enlisted and 77th
for officers—are somewhat lower than those of the 11th QRMC. Although the estimates
differ, both estimates show relatively high percentiles, yet methodological differences
contribute to the discrepancy.48
Taking into account the somewhat different methodology used by RAND in 2018, its authors
conclude “overall RMC percentiles for 2016 for enlisted personnel and officers were virtually the
same as for 2009.”49
If There Is a Pay Gap, Does It Matter?
Some have suggested that the emphasis on a pay gap, whether real or not, is an inappropriate
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, some ask 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 might be appropriate, even if
the existing “gap” favors the military. Conversely, if military compensation is lower than

47 Department of Defense, 11th Quadrennial Review of Military Compensation, June 2012, p. xvii,
http://militarypay.defense.gov/Portals/3/Documents/Reports/11th_QRMC_Main_Report_FINAL.pdf?ver=2016-11-06-
160559-590.
48 James Hosek, Beth J. Asch, and Michael G. Mattock et al., Military and Civilian Pay Levels, Trends, and Recruit
Quality, RAND Corporation, 2018, p. 28, https://www.rand.org/pubs/research_reports/RR2396.html.
49 James Hosek, Beth J. Asch, and Michael G. Mattock, et al., Military and Civilian Pay Levels, Trends, and Recruit
Quality, RAND Corporation, 2018, p. xiv, https://www.rand.org/pubs/research_reports/RR2396.html.Page xiv. See
also pages 28-29.
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equivalent civilian pay, and if the services are doing well in recruiting and retaining sufficient
numbers of qualified personnel, then there might be no reason to raise military pay.
The 11th QRMC voiced similar sentiments when it argued the following:
A comparison between military and civilian wages does not, by itself, determine if military
pay is at the optimal level. As previously noted, other factors are also at play including:
recruiting and retention experiences and outlook; unemployment in the civilian economy;
political factors, such as a wartime environment or risk of war; and the expected frequency
and duration of overseas deployments. But the relative standing of military compensation
provides context to help make decisions about RMC and other elements of the
compensation system, such as those studied by the QRMC.50
7. What Additional Benefits Are Available for Military Personnel
Serving in Iraq and Afghanistan?
Members of the Armed Forces serving in Iraq or Afghanistan are entitled to various additional
forms of compensation, described below. Those serving in nearby countries are often eligible as
well.
Hostile Fire/Imminent Danger Pay
Military personnel serving in Iraq or Afghanistan are eligible for Hostile Fire Pay (HFP) or
Imminent Danger Pay (IDP).51 HFP is paid at the rate of $225 per month; IDP is paid at an
equivalent rate, but on a daily basis ($7.50 per day).52 The purpose of this pay is to compensate
servicemembers for physical danger. An individual can collect either Hostile Fire Pay or
Imminent Danger Pay, not both simultaneously. Iraq and Afghanistan are designated imminent
danger locations; any servicemember in these locations is entitled to IDP by virtue of their
presence. Certain areas surrounding these countries were formerly designated as imminent danger
locations, but DOD revoked this designation in 2014.53 For a list of all imminent danger
locations, see the DOD Financial Management Regulations.54

50 Department of Defense, 11th Quadrennial Review of Military Compensation, June 2012, p. xvii,
http://militarypay.defense.gov/Portals/3/Documents/Reports/11th_QRMC_Main_Report_FINAL.pdf?ver=2016-11-06-
160559-590.
51 37 U.S.C. § 351 (previously 37 U.S.C. 310). Under 37 U.S.C. §351, HFP and IDP are types of hazardous duty pay.
By law, the maximum amount of HFP is $450 per month and the maximum amount of IDP is $250 per month.
However, these figures are caps; DOD has discretion to offer lesser amounts. See DOD Instruction 1340.09, Hazardous
Pay Program, January 26, 2018, http://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/134009p.PDF?
ver=2018-01-30-123041-040.
52 Servicemembers exposed to a hostile fire event receive the full $225 for the month in which the hostile fire event
occurs. Those not exposed to hostile fire, but serving in an IDP location, receive IDP on a daily basis (i.e., $7.50 per
day).
53 For example, DOD ended the imminent danger designation for Kuwait, Bahrain, Oman, Qatar, Saudi Arabia, United
Arab Emirates, Kyrgyzstan, Tajikistan, Uzbekistan, and certain nearby bodies of water on May 31, 2014.
54 DOD FMR, Chapter 10, Figure 10-1, available at http://comptroller.defense.gov/Portals/45/documents/fmr/
Volume_07a.pdf.
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Hardship Duty Pay
Military personnel serving for over 30 days in Iraq, Afghanistan, and certain surrounding
countries are eligible for Hardship Duty Pay (HDP).55 HDP is compensation for the exceptional
demands of certain duty. In the case of Iraq and Afghanistan, it is compensation for the austere
living conditions of the location. The rate for HDP in Iraq and Afghanistan is $100 per month.56
Family Separation Allowance
Military personnel serving in Iraq, Afghanistan, and surrounding areas may be eligible for Family
Separation Allowance (FSA).57 FSA 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, and to reimburse members who must maintain a home in the United States for their
dependents and another home overseas for themselves for the average expenses of maintaining
the overseas home.”58 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 for Incidental Expenses
Military personnel using military facilities and serving in Iraq and Afghanistan receive per diem
equivalent to $105 per month to cover incidental expenses. The rate is the same for all personnel.
Combat Zone Tax Exclusion
One of the more generous benefits for many of those serving in Iraq or Afghanistan, and certain
surrounding areas,59 is the “combat zone tax exclusion.”60 Military personnel serving in direct
support of operations in these combat zones are also eligible for the combat zone tax exclusion, as
are those “hospitalized as a result of wounds, disease, or injury incurred while serving in a
combat zone.”61 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 to the maximum amount of enlisted basic pay

55 37 U.S.C. §351 (previously 37 U.S.C. §305). By law, the maximum amount of HDP is $1,500 per month. However,
this figure is a cap; DOD has discretion to offer lesser amounts. See also DOD Instruction 1340.26, Assignment and
Special Duty Pays, September 25, 2017, http://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/
134026p.pdf?ver=2017-09-25-112849-877.
56 For a complete listing of HDP locations, see Chapter 17, Figure 17-1 of this document:
http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07a.pdf.
57 37 U.S.C. §427. See also DOD Financial Management Regulation, Volume 7A, Chapter 27,
http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07a.pdf.
58 Department of Defense, Military Compensation Background Papers, 8th Edition, November 2018, p. 827, available
at https://www.loc.gov/rr/frd/pdf-files/Military_Comp-2018.pdf.
59 For a listing of areas that qualify for the combat zone tax exclusion, see https://www.irs.gov/newsroom/combat-
zones.
60 26 U.S.C. §112.
61 26 U.S.C. §112; the hospitalization provision expires two years after the termination of combat activities in the
designated combat zone.
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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 qualify for a reenlistment or retention bonus while stationed
in a combat zone do not have to pay federal income tax on the bonus (though commissioned
officers are still subject to the cap mentioned above).62 The amounts involved can be substantial,
often in the tens of thousands of dollars, and occasionally over $100,000.63
Savings Deposit Program
Another benefit available to those deployed to a combat zone64 is eligibility for the Savings
Deposit Program. This program allows servicemembers 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.
8. What Benefits Are Available to the Survivors of Military
Personnel Killed in Iraq or Afghanistan?
Currently, the survivors (typically, spouses and children) of military personnel who die on active
duty, whether serving in combat zones or not, are eligible for a number of monetary and other
benefits. These generally include the following:
 A death gratuity of $100,000, payable within a few days of the death to assist
families in dealing with immediate expenses.
 Servicemembers’ Group Life Insurance (SGLI)65 of up to $400,000.66
 Disbursement of unpaid pay and allowances.
 One year of government housing or BAH.
 Three years of TRICARE Prime coverage at no cost, followed by coverage at the
retiree dependent rate (unmarried children remain covered as active duty family
members until age 21, or until age 23 if enrolled in school full-time).67

62 See DOD Financial Management Regulation, Volume 7A, Chapter 44, Table 44-1, Rule 5: “a bonus entitlement
(including installments)” is considered not taxable if a servicemember “(reenlists, extends, signs agreement) in a month
during which CZ [combat zone] or QHDA [qualified hostile duty area] exclusion applies, regardless of whether the
member fulfills the bonus contract service requirement before entering or after returning from the CZ or QHDA,” at
https://comptroller.defense.gov/Portals/45/documents/fmr/current/07a/07a_44.pdf.
63 Reenlistment or retention bonuses of $100,000 or more are unusual, but they do occur. For example, in 2008, certain
special forces soldiers were eligible for a critical skills retention bonus of $150,000 upon reenlisting for six years. See
this article: http://www.stripes.com/news/150-000-bonus-offered-for-some-special-forces-1.75636.
64 For a listing of areas that qualify for the combat zone tax exclusion, see https://www.irs.gov/newsroom/combat-
zones. For more information on the Savings Deposit Program, see DOD Financial Regulation, Volume 7A, Chapter 51,
https://comptroller.defense.gov/Portals/45/documents/fmr/current/07a/07a_51.pdf.
65 All servicemembers are automatically enrolled in this benefit, for which $25 per month is deducted from their pay.
Members may opt out or reduce coverage.
66 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 (P.L. 109-13). The death gratuity was
raised from $12,420 to $100,000; and the maximum SGLI coverage was raised from $250,000 to $400,000. The 2006
NDAA applied the $100,000 death gratuity to all active-duty deaths (not just those that were combat-related) and made
the payments retroactive to October 7, 2001.
67 After their eligibility as a family member ends, children of survivors may also purchase TRICARE Young Adult to
extend coverage up to age 26.
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 Commissary and Exchange access.
 Burial expenses.
 One or more survivor benefit annuities (Social Security Survivor Benefits, DOD
Survivor Benefit Plan,68 and/or Veterans Affairs Dependency and Indemnity
Compensation; receipt of more than one annuity may require offsets between the
annuities).
Note, however, that each type of benefit described above has its own eligibility criteria. Survivors
may, or may not, qualify for a given benefit based on their unique circumstances. For more
detailed information on who qualifies for a given benefit, see the Department of Defense’s A
Survivor’s Guide to Benefits.69

Author Information

Lawrence Kapp
Barbara Salazar Torreon
Specialist in Military Manpower Policy
Senior Research Librarian

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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copy or otherwise use copyrighted material.

68 For more information on this program and its offsets, see CRS Report R45325, Military Survivor Benefit Plan:
Background and Issues for Congress, by Kristy N. Kamarck and Barbara Salazar Torreon.
69 http://www.militaryonesource.mil/survivorsguide. For the earlier legislative history of some of these benefits, see
Department of Defense, Military Compensation Background Papers, 8th Edition, 2018, Appendix IX.
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