Paying service members in cash could provide better incentives for recruitment and retention than the existing system of benefit programs, according to a report released this month by the non-partisan Congressional Budget Office (CBO).
In the report, CBO concluded:
* In most cases, cash compensation for service members exceeds the Defense Department’s benchmark — roughly the 70th percentile of wages and salaries for civilians in comparable jobs. Sometimes, military compensation is significantly higher. In its research, CBO included military basic pay as well as non-taxable food and housing allowances.
* Military compensation is weighted less toward cash and more toward deferred benefits such as health care, education benefits and retirement pay. Even though it isn’t apparent at first blush, a thorough assessment shows that this serves to increase the value of military compensation in comparison to that of civilians.
* Changing the military compensation package to focus more on cash compensation and less on benefits could both slow the growth of government spending and still attract, retain and motivate a quality force.
While the present pay and benefits structure does promote financial security, CBO concluded that it favors those who stay in uniform long enough to retire. Younger people are more likely to value cash compensation more than the existing benefits package.
The report suggested that repackaging compensation to one that focuses on bonuses and salaries deserves consideration.
Instead of basic-pay increases, bonuses could target good performers and those in career fields that are beset by staffing shortages. CBO acknowledged, however, that recruitment and retention could be hindered in years when bonus payments are slowed or remain stagnant.
A possible change in the salary system would link pay raises to duties and responsibilities. Raises could be meted out based on job performance rather than factors such as family size and marital status.
Reducing non-cash and deferred compensation in favor of cash benefits could provide service members with greater flexibility as to how they would spend their pay, CBO concluded. But it would entail eliminating popular and traditional programs such as DoD-run elementary and secondary schools and Post-9/11 GI Bill education benefits for spouses and children, and increase out-of-pocket expenses for retirees who rely upon military treatment facilities for health care.