One factor that affects whether people join or remain in the military is how the compensation they expect to receive compares with that of civilian jobs. To recruit and retain members of the armed forces, the Department of Defense (DoD) must offer a pay package that is competitive with opportunities in the civilian sector and that adequately compensates personnel for the difficulties of serving in the military. In the late 1990s, lawmakers and DoD began making a concerted effort to increase cash and noncash elements of military compensation, in part because of declining retention among service members.

This Congressional Budget Office (CBO) study—prepared at the request of the Ranking Member of the Senate Budget Committee—offers an overview of military compensation, particularly that of active-duty enlisted personnel. It considers various ways to measure military compensation and to compare military and civilian pay, as well as issues raised by such comparisons. The study also examines the connection between the components of military compensation and DoD's recruiting and retention. Finally, it discusses options to make military compensation more efficient. In keeping with CBO's mandate to provide objective, impartial analysis, this study makes no recommendations.

Carla Tighe Murray of CBO's National Security Division wrote the study under the general supervision of Matthew S. Goldberg and J. Michael Gilmore. Victoria Liu, Allison Percy, Matthew Schmit, and Jason Wheelock contributed to the analysis. Nabeel Alsalam provided data on civilian workers, and Cary Elliott provided data on federal civilian employees. Thomas DeLeire, Robert Dennis, Arlene Holen, Sarah Jennings, and Donald Marron offered helpful comments, as did John Enns of the Naval Postgraduate School. (The assistance of an outside reviewer implies no responsibility for the final product, which rests solely with CBO.)

Christian Howlett edited the manuscript, and Christine Bogusz proofread it. Cindy Cleveland produced drafts of the manuscript and the tables. Maureen Costantino prepared the report for publication and designed the cover. Lenny Skutnik printed the initial copies, Linda Schimmel coordinated the print distribution, and Simone Thomas prepared the electronic version for CBO's Web site.

Peter R. Orszag
Director
June 2007

---