Some service members may be getting paid too much, according to a new white paper published by the RAND Arroyo Center. The federally funded Santa Monica, Calif.-based think tank came to this conclusion after studying how military compensation could support recruitment, retention and performance.
It recommends that the Pentagon reevaluate the pay-adjustment mechanism, consider increasing performance incentives, increase pay flexibility by improving the way special and incentive pays are offered, and setting appropriate continuation pay rates for the new Blended Retirement System.
Under other proposed changes, the Defense Department (DoD) should reform the accrual charge system so that it would maximize efficiency of the retirement system, and lawmakers should consider legislative changes for pay to provide more flexibility in officer management.
The report offered these findings:
* Military pay for both officers and enlisteds in recent years has exceeded the 70th percentile, calling into question whether pay rates are too high.
* The Employment Cost Index, which is used to determine the annual military pay raise, “did not track well with the opportunity wages or perform well in terms of tracking force-management outcomes.”
* The Army, in particular, “did not increase aptitude as military and civilian pay rose in recent years.”
* The officer pay table “appears compressed” and could possibly provide fewer financial incentives for better performance. Special and incentive pays may not be serving the purpose for which they are intended — to provide good performers with reasons to stay in uniform.
* The continuation pay multipliers inherent of the new Blended Retirement System are not set to provide officers and enlisteds with reasons to continue their military careers, when compared with the legacy retirement system.
* Funding the military retirement system on a flawed accrual basis, with rates based on “inaccurate budget estimates and incorrect incentives.”
RAND Arroyo recommends:
* Assessing whether basing pay levels on the 70th percentile of civilian pay is the correct path.
* Reevaluating the mechanism for adjusting pay, to include a reassessment of the Employment Cost Index. Other options, such as the Defense Employment Cost Index, could be included in such calculations.
* Performance incentives that are embedded in the pay table could be increased.
* Incentive and special pays should be tweaked to “increase flexibility and efficiency.”
* Setting the Blended Retirement Pay’s continuation pay at correct levels.
* Including another opt-out window for participants of the Blended Retirement Pay system.
* Setting the retirement accrual system at different rates for officers and enlisteds.
* Using compensation to encourage “more volunteerism.”
* Acknowledge that any changes made to the Defense Officer Personnel Management Act should be done with the intent of improving management flexibility, and determining how and if military compensation should change.