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. Other CRS reports cover military retirement and health care. 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. 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. Non cash 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. 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 Savings Plan (TSP), although until 2018 they generally did not receive matching contributions from the government. 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. 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. 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. 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." 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. 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. 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. 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. 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 costs 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 servicemembers of similar paygrade and dependents status should be able to pay for roughly comparable housing regardless of their duty location. 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. 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." 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). Nearly all servicemembers receive a monthly payment to defray their personal food costs. This is known as basic allowance for subsistence (BAS). BAS is provided at a flat rate: In 2019, enlisted personnel receive $369.39 a month, while officers receive $254.39 a month. 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. 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. Military allowances, on the other hand, are generally not considered part of gross income 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. , 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. 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. 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 b asic 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. 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 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. 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 and1982 and calendar years 1984-2010, 2013, and 2017-2018 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, or 2019, thereby allowing the statutory formula or the presidential alternative adjustment 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 is paid to servicemembers living in the United States who do not choose or are not provided government quarters. 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." 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. 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. 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." 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). DOD estimated that BAQ+VHA covered about 80% of housing costs in 1996. 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. 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, 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). DOD has indicated that a save pay provision, discussed above, will apply to these changes. 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." 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. For a table that summarizes recent increases in basic pay, see CRS In Focus IF10260, Defense Primer: Military Pay Raise , by Lawrence Kapp. 2019 . Statutory Formula: 2.6 %. Administration request: 2.6 %. The House-passed version of the FY2019 National Defense Authorization Act (NDAA) contained no provision to specify the rate of increase in basic pay. Section 601 of the Senate-passed version of the FY2019 NDAA 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 National Defense Authorization Act (NDAA) 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 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 ) 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 ) 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 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 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 waiving 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 pay cells. 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-9s ( 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: I dentical 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 ). 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 ). 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. 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 goal and senior defense officials have testified that a strong economy has made it more challenging for them to recruit new personnel. If recruiting problems were to become more widespread, increased advocacy for compensation increases could well occur. 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. 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. 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. 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 all mention travel and adventure in exotic places as a positive reason for enlistment and/or a military career, so it may be misleading to automatically assume 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: 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. 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 then in military basic pay have generally not kept up with increases in civilian pay (as measured by the ECI). 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 2018. 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. 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 9 th 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 70 th percentile of comparably educated civilians has been necessary to enable the military to recruit and retain the quantity and quality of personnel it requires" 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 servicemember RMC up substantially in relation to civilian compensation. According to the 11 th 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 90 th 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 83 rd percentile of wages for the combined civilian comparison groups. 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 11 th QRMC in 2009. Using a similar, though not identical, methodology the RAND report found that RMC had remained well above the 70 th percentile of comparability educated civilians: The 11 th QRMC, using 2009 data, placed RMC at the 90 th percentile of civilian pay for enlisted and the 83 rd for officers. Our percentiles for 2016—the 84 th for enlisted and 77 th for officers—are somewhat lower than those of the 11 th QRMC. Although the estimates differ, both estimates show relatively high percentiles, yet methodological differences contribute to the discrepancy. 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." 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 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 11 th 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. 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. Military personnel serving in Iraq or Afghanistan are eligible for Hostile Fire Pay (HFP) or Imminent Danger Pay (IDP). 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). 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. For a list of all imminent danger locations, see the DOD Financial Management Regulations. Military personnel serving for over 30 days in Iraq, Afghanistan, and certain surrounding countries are eligible for Hardship Duty Pay (HDP). 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. Military personnel serving in Iraq, Afghanistan, and surrounding areas may be eligible for Family Separation Allowance (FSA). 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." 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. 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. One of the more generous benefits for many of those serving in Iraq or Afghanistan, and certain surrounding areas, is the "combat zone tax exclusion." 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." 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 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). The amounts involved can be substantial, often in the tens of thousands of dollars, and occasionally over $100,000. Another benefit available to those deployed to a combat zone 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. 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) of up to $400,000. Disbursement of unpaid pay and allowances. One year of government housing or BAH. Three years of TRICARE coverage at the active duty dependent rate, followed by coverage at the retiree dependent rate (children remain covered as active duty family members until age 21, or until age 23 if enrolled in school full-time). Commissary and Exchange access. Burial expenses. One or more survivor benefit annuities (Social Security Survivor Benefits, DOD Survivor Benefit Plan , 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 .
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% under 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.