US Troops May Be Overpaid, New Study Finds

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A new study on the military's pay and compensation system asks a surprising question: Are troops getting paid too much?

Service members have typically earned about 70% of the salaries for civilians with similar skill sets, when factoring in their housing and allowances to offset food costs. That’s the level of compensation researchers found the military would need to offer to recruit and retain the right quality and quantity of personnel, according to a new report from RAND Corporation, a nonprofit think tank.

But troops’ compensation has jumped beyond that 70th percentile mark for both officers and enlisted troops, according to RAND. Over the course of the 2000s, military pay relative to civilian pay "increased substantially," the report’s author wrote.

Now that enlisted troops are earning closer to 90% of what their civilian counterparts make, and officers about 83%, she says it's "raising the question of whether military pay is set too high relative to civilian pay."

The report, which Military Times first wrote about, looks at how the military's pay system could be improved to support recruitment, retention and performance. Beth Asch, a senior economist at the RAND Corporation, doesn't make a determination about whether troops are overpaid, but rather recommends the levels be assessed.

Related: 2020 Budget Proposal Has Largest Troop Pay Increase in a Decade

"Given that military pay is above the 70th percentile benchmark and has been for some time, the important question is whether this benchmark is still relevant or whether military pay is set too high relative to civilian pay," Asch wrote.

In addition to their pay, troops also live on base at no cost or receive a non-taxable housing allowance if they reside off post. That amount is determined by pay grade, geographic location and family size. Active-duty troops may also draw stipends to offset food costs.

Troops are also eligible for military-provided health care, but those benefits aren’t factored into the military compensation totals referenced in this study. There are other benefits and advantages, too, that may draw people to the military that are not factored into the calculation, including skills training, guaranteed employment on multi-year contracts and free post-secondary education through the post-9/11 GI Bill, among others.

Of course, military service also comes with unique challenges and risks -- including deployments, mandatory moves and far less employment flexibility than the civilian world offers.

As military pay improved, so did the quality of troops, Asch said -- that is, in all the services but the Army.

"The reason why the Army did not increase recruit aptitude as military pay rose relative to civilian pay is an open question," she wrote.

One possibility, Asch wrote, was that the introduction of the post-9/11 G.I. Bill cut out the Army's ability to provide education benefit "kickers" to recruits entering selected occupations. Since all recruits got access to post-9/11 education benefits, the Army might have struggled to attract some high-quality prospects, she said.

Aside from recruiting, Asch discusses how military pay affects retention and performance. Rather than simply relying on step increases when troops pick up new rank, Asch says a more flexible system could incentivize hard work.

"The primary source of flexibility and efficiency in the military compensation system turns out to be only a small fraction of cash compensation," RAND's key findings state. "Special and incentive pays are not as efficient as they could be in providing incentives for retention and performance."

The think tank recommends improving how incentive and special pays are handled to "increase flexibility and efficiency."

-- Gina Harkins can be reached at gina.harkins@military.com. Follow her on Twitter @ginaaharkins.

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