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The size and distribution of the annual military pay raise has important effects on the defense budget and on the ability of the military services to recruit and subsequently to retain personnel. This year the Congress has debated a wide variety of pay raise policies to take effect in October 1982. This report, prepared at the request of the Subcommittee on Manpower and Personnel of the Senate Committee on Armed Services and the Subcommittee on Defense of the House Committee on Appropriations, analyzes the effects of alternative pay raises for fiscal years 1983 through 1987. In accordance with CBO's mandate to provide objective analysis, the report contains no recommendations.

This report was prepared by John H. Enns of the National Security and International Affairs Division of the Congressional Budget Office, under the general supervision of Robert F. Hale and Daniel F. Huck. Joel Slackman of the National Security Division produced many of the projections of recruiting and retention while Alice Hughey, formerly with the Budget Analysis Division, provided the cost estimates for the various pay raise alternatives. Special cost estimates for the educational benefits alternative were prepared by Lorin Kusmin. Francis Pierce edited the paper and Janet Stafford prepared the report for publication.

September 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION

• Current Issues
• Pay Raise Alternatives

CHAPTER II. EFFECTS ON RETENTION AND RECRUITING

• Factors Other Than Pay Raises
• Career Retention
• Recruiting

CHAPTER III. COSTS

• Pay Raises
• Retirement Pay

The Congress is now considering the size of the annual military pay raise scheduled to take effect on October 1, 1982; it may also set goals for pay raises beyond 1982. This report analyzes the effects of alternative pay raises on costs, retention of career personnel, and recruiting. Since at present there are no major problems in retaining or recruiting officers, the report focuses on enlisted personnel.

Many factors other than pay raises affect costs, retention, and recruiting. General economic factors play an important role. The results presented in this report are based on the assumption that unemployment will decline over the next five years. (There is, however, considerable uncertainty in any economic projection, particularly as to the future course of interest rates and thus the pace of economic recovery.) The analysis also assumes Congressional approval of service plans for a somewhat larger military, calling for increases by 1987 of about 150,000 enlisted personnel over 1982 levels, a rise of about 8 percent. Other personnel policies--such as the required number of female recruits and required proportion of recruits with previous military service--are assumed to remain similar to today's policies.

One such policy deserves special mention. The Army has indicated that in 1982 and 1983 it is limiting the size of its career force by raising standards for reenlistment. The paper assumes that the Army will continue to limit its career force over the next five years to about 44 percent of the total enlisted force, which is close to today's percentage. This limit has important implications for future years since it requires a larger number of recruits than would be the case if reenlistments were higher. A decision to raise reenlistment standards in the Army should thus be weighed in terms of the recruiting policies that will be required to support it. The Marine Corps may also limit the size of its career force, but no such limits are assumed for the other two services.

This document is available in its entirety in PDF.