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Pay Gap Real, Compensation Fix Needed, Shelton Says

By Jim Garamone
American Forces Press Service

WASHINGTON, Nov. 5, 1998 – While experts can argue about its size, a pay gap exists and DoD will start closing it in the next budget cycle, the nation's top military leader said.

Army Gen. Henry Shelton, chairman of the Joint Chiefs of Staff, was responding to newspaper reports quoting a Rand Corp. paper implying there was no gap between military and civilian-sector pay. On the contrary, DoD officials said, the gap is 8.5 percent to 13.5 percent depending on the year used as a baseline.

Shelton said DoD is committed to revamping the entire military compensation package in its fiscal 2000 budget, to include retirement and military pay tables. "The president has indicated ... he wanted the secretary and [me] to work with the Joint Chiefs to look at the entire entitlements package and come back to him with where we felt we needed to go," he said.

"If you go back to the previous era of big pay raises -- in 1979, 1980 and 1981 -- you will see defense officials waited until [the military] was broke and then they went to fix it," said a Joint Staff official. "What we started to do was look and see how we can prevent that. The serious effort started nine months ago."

In the past, military pay has been loosely tied to federal civilian employees' pay raises. By law, civilian raises are keyed to the Bureau of Labor Statistics' Employment Cost Index, or ECI, minus one-half of a percentage point. The ECI measures the growth of private-sector wages and salaries.

To address the pay gap, defense officials said, military raises must match the full ECI level. The fiscal 2000 pay raise is set for 4.4 percent. The ECI for fiscal 2000 is estimated at 4.3 percent. Pay raises for the Future Years Defense Plan are now set at 3.9 percent.

Officials also said they are working on a retirement package. They said service members think Redux, the plan where retirees receive 40 percent of base pay after 20 years' service, is not a career incentive. They would not comment directly on proposed changes, but said they are looking at everything, including a modified 401k or thrift savings plan.

Changing the structure of pay tables is another major effort. "The pay tables were meant for a force that came into the service for a short time -- three, four years -- and raises were hefty in those first four years," said a Joint Staff official. "This needs to change." The 1998 tables are based on 1949 thinking.

Officials said the pay gap is not large for junior enlisted members or junior officers, but it widens appreciably for mid-range and senior noncommissioned officers and officers. "It can be as much as 20 percent for some specialties and pay grades," said a Joint Staff official.

Targeting pay raises is the answer. Whether these pay raises will be on top of a 4.4 percent pay raise or as part of it remains to be seen. "It all comes down to resources," said a defense official.

Officials said the Rand paper that caused the ruckus was "not ready for prime time." The study is a work in progress and is only part of the information defense planners will use in revamping the compensation system. "As we deliberate in putting a compensation package together, we go beyond what Rand was asked to look at," said one official. "You have to take into account the professional experience and education our troops get."

The average new service member is 18 or 19 years old with a high school education. "We feel their pay is pretty competitive to what their cohorts in the private sector may earn," the official said. "But just as their civilian cohorts continue to gather education and work experience, so do our people. There is not a good crosswalk between the military and civilian sides.

"We ask our people to do different things," he continued. "We tell our people to move every couple of years -- they don't have a choice. We don't give them overtime for the hard work they do, and as the force gets smaller our people are working harder. We don't send civilians into danger and we don't ask civilians to lay down their lives for their country. So, the military person is different, and you have to take that into account when making pay comparisons."

Shelton is pleased with the support a compensation overhaul seems to have on Capitol Hill. "Congress coming in and supporting legislation in [fiscal] 1999, I think, was a positive sign," he said. "There are a lot of people [in Congress] who understand where we are right now and what's going to have to be done to maintain this quality force that we've got."

With all the discussion on the size of the pay gap, when will officials know when the pay gap is closed? "You have closed the gap when you are turning people away at the recruiting stations and you are having to look at how you're going to maintain promotion profiles because so many people want to stay," said a defense official.

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