CBO,  RAND, and CNA have assessed military compensation using varying  approaches. For example, in order to  value health care, CNA estimated the difference in value between military  and civilian health benefits, because servicemembers receive more  comprehensive health care than most civilians. Nevertheless, we note that CNA’s study and other studies  of military compensation illustrate that valuing total military  compensation from a servicemember’s perspective is challenging, given  the variability across the large number of pays and benefits, the need to  make certain assumptions to estimate the value of various benefits, and  the utilization of benefits by servicemembers or their dependents, among  other reasons. We do not believe that such comparisons  demonstrate the existence of a pay gap or facilitate accurate comparisons  between military and civilian compensation because they assume that  military basic pay is the only component of compensation that should be  compared to changes in civilian pay and exclude other important  components of military compensation, such as the housing and  subsistence allowances. In general, when  comparing military and civilian compensation, a more complete or  appropriate measure of compensation should include cash and benefits. Prior to issuing our report earlier this month the Deputy Under Secretary  of Defense for Military Personnel Policy provided us with oral comments  on a draft of the report. Given that (1) the ability to recruit and retain is a  key indicator of the adequacy of compensation and (2) DOD has generally  met its overall recruiting and retention goals for the past several years, it  appears that regular military compensation is adequate at the 70th  percentile of comparable civilian pay as well as at the 80th percentile  when additional benefits are included. Concluding Observations

In closing, we note that comparisons between military and civilian  compensation are important management tools—or measures—for the  department to use to assess the adequacy and appropriateness of its  compensation. However, such comparisons present both limitations and  challenges. For example, data limitations and difficulties valuing  nonmonetary benefits prevent exact comparisons between military and  civilian personnel. Moreover, these comparisons represent points in time  and are affected by other factors, such as the health of the economy. To  illustrate, it is not clear the degree to which changes in the provision of  civilian health care or retirement benefits affect the outcome of comparing  military and civilian compensation. In addition, valuing military service is  complicated. While serving in the military offers personal and professional  rewards, such service also requires many sacrifices—for example,  frequent moves and jobs that are arduous and sometimes dangerous. Ultimately, DOD’s ability to recruit and retain personnel is an important  indicator of the adequacy—or effectiveness—of its compensation.
Why GAO Did This Study

This testimony discusses our most recent report on military and civilian pay comparisons and the challenges associated with those types of comparisons. The Department of Defense's (DOD) military compensation package, which is a myriad of pays and benefits, is an important tool for attracting and retaining the number and quality of active duty servicemembers DOD needs to fulfill its mission. Since DOD transitioned to an all-volunteer force in 1973, the amount of pay and benefits that servicemembers receive has progressively increased. When it is competitive with civilian compensation, military compensation can be appropriate and adequate to attract and retain servicemembers. However, comparisons between the two involve both challenges and limitations. Specifically, as we have previously reported, no data exist that would allow an exact comparison between military and civilian personnel with the same levels of work experience. Also, nonmonetary considerations complicate such comparisons, because their value cannot be quantified. For example, military service is unique in that the working conditions for active duty service carry the risk of death and injury during wartime and the potential for frequent, long deployments, unlike most civilian jobs. In addition, there is variability among past studies in how compensation is defined (for example, either pay or pay and benefits) and what is being compared. Most studies, including those done by the Congressional Budget Office (CBO) and RAND Corporation, have compared military and civilian compensation but limit such comparisons to cash compensation--using what DOD calls regular military compensation--and do not include benefits. The National Defense Authorization Act for Fiscal Year 2010 required that we conduct a study comparing the pay and benefits provided by law to members of the Armed Forces with those of comparably situated private-sector employees, to assess how the differences in pay and benefits affect recruiting and retention of members of the Armed Forces. Earlier this month, we issued our report. This testimony today summarizes the findings of that report.

What GAO Found

Comparisons between military and civilian compensation are important management tools--or measures--for the department to use to assess the adequacy and appropriateness of its compensation. However, such comparisons present both limitations and challenges. For example, data limitations and difficulties valuing nonmonetary benefits prevent exact comparisons between military and civilian personnel. Moreover, these comparisons represent points in time and are affected by other factors, such as the health of the economy. To illustrate, it is not clear the degree to which changes in the provision of civilian health care or retirement benefits affect the outcome of comparing military and civilian compensation. In addition, valuing military service is complicated. While serving in the military offers personal and professional rewards, such service also requires many sacrifices--for example, frequent moves and jobs that are arduous and sometimes dangerous. Ultimately, DOD's ability to recruit and retain personnel is an important indicator of the adequacy--or effectiveness--of its compensation.