Experts and advocates commended a new Pentagon report on military pay and compensation, saying the document will help guide much-needed changes to how the Defense Department sets benefits and bring more awareness to the role of military spouses in service members’ financial health.
“The importance of this study cannot be overstated,” Derek Doyle, director of public affairs for the Military Family Advisory Network, told Air & Space Forces Magazine. “The financial security of military families is an issue of national security. Financial health and compensation are inextricably connected, as are financial well-being and overall well-being, and the propensity to recommend military service.”
Released Jan. 15, the 14th Quadrennial Review of Military Compensation took a sweeping look at the military compensation system, including basic pay, housing allowance, cost of living allowance, child care incentives, bonuses, and other benefits.
The report determined that military compensation is strongly competitive with the civilian labor market, but the Defense Department needs to update its methodology for several of its allowances and rethink support for military spouses. Those include:
- The basic allowance for housing (BAH), which can change wildly year to year and is not always aligned with expensive areas where troops are stationed.
- Cost of living allowances (COLA), which covers non-housing expenses in pricey areas. The report said COLA rates are sometimes thrown off by incomplete, outdated surveys.
- Non-cash compensation (such as retirement options, child care support, employment initiatives) to provide financial stability for spouses after permanent change of station (PCS).
BAH
The rapid economic shocks of the COVID-19 pandemic played a significant role in QRMC’s recommendations, said Katherine Kuzminski, director of the Military, Veterans, and Society Program at the Center for a New American Security.
“In 2020 and 2021, we saw this huge jump in the cost of housing across the country … and BAH is recalculated just once a year,” she said. “All the reporting that came out at the time about junior enlisted service members and families being food insecure, that was all linked to the fact that if you’re ordered to move, you have to move, and if there’s price gouging in the housing market, you absorb that cost.”
In response, the Pentagon authorized targeted BAH increases starting in 2021, but the formula for calculating BAH rates does not always match the needs of a military housing area, the QRMC report concluded. Indeed, 79.8 percent of respondents to a 2023 survey by the Military Family Advisory Network said they pay more than they can comfortably afford for housing, and 70.1 percent said bumps to BAH rates were negated due to inflation and high regional costs.
The report said BAH for service members with dependents is between 17 and 60 percent higher than average civilian housing expenditures, but many families say it is not enough, according to Eileen Huck, government relations senior deputy director at the National Military Family Association.
“We often hear from families who are paying quite a bit out of pocket for housing,” she said. “Their BAH is not enough to cover the cost of housing, and that’s especially an issue in high cost-of-living areas like southern California and Hawaii. But it’s not limited to those areas.”
The compensation review recommended that the Pentagon revise its BAH methodology to be more stable and accurate, in part by pulling in census data and basing rates on the number of bedrooms in a dwelling rather than the type of dwelling. That recommendation lines up with a letter MFAN, NMFA, and 15 other military service organizations wrote to the Pentagon last February which specifically called for modernizing the housing allowance formula.
“The current system is not working for a lot of families,” Huck said. “BAH is a big part of military compensation, so it’s important that they get it right.”
Spouse Employment
Experts also praised the 14th QRMC for its focus on military spouses. This report was the first in the series to examine the impact of dual-income households. Most military spouses want to work, the report found, but frequent moves and changes in child care access reduce their ability to do so, which can in turn affect retention decisions.
About 22 percent of Active-Duty spouses are unemployed and looking for work, Huck pointed out, and the QRMC found that spouse earnings fall by an average of 14 percent in any PCS year.
“That has a pretty significant cumulative effect on the spouse’s earning potential, and then obviously has an impact on the family’s financial stability as well,” she said.
The QRMC recommended non-cash compensation options, such as decreasing PCS frequency, expanding access to child care, and reducing barriers to spouse retirement savings. Huck said there’s still more to be done, such as expanding tax credits for employers that hire military spouses. But the report is a big step for military officials.
“Now that the department and the services have this data about the impact of military service on spouse employment and income, they can make policy changes to hopefully make it easier for military spouses to stay in jobs and build their careers,” she said.
More Than Pay
A key point of the 14th QRMC is that the military compensation package is “strongly competitive” with the civilian labor market. On average, enlisted troops make more money than 82 percent of their civilian counterparts with similar education and experience, while officers make more than 75 percent, the report found.
An upcoming pay raise will raise that bar even higher, but the QRMC figures may not be as impressive as they sound amid stagnant civilian wages and high living costs, Kuzminski said.
“Civilian wages have largely stagnated since the early 1990s,” she said. “So if you take an E-2 with two years of experience and compare them to the standard 20-year-old, just because you’re doing better than that does not mean that you objectively feel like you’re well off.”
Indeed, the report’s conclusions seem to run contrary to moves by Congress, which recently passed a 14.5 percent pay raise for junior enlisted troops and a 4.5 percent pay raise for the rest of the military. But Kuzminski said the two parties approach the subject with different goals.
“The QRMC is looking at it in pure economic terms, like, could you get the same force for less dollars?” she said. “Whereas what Congress is looking at has a lot more to do with signaling morality and values.”
The review made eight recommendations to improve the military compensation picture, and Kuzminski said they have a good chance of being acted on even as a new administration under President-elect Donald Trump takes over next week.
“I don’t think any of [the recommendations] are controversial,” she said, since raising military compensation is a rare area of agreement in Congress. “I think that we’ll see quite a bit of bipartisan support.”