Military Pay Raises Set to Shrink Under Proposed Budget

Military pay

Policy changes beginning in 2015 could mean thousands of dollars less in pay for the average soldier.

Pentagon officials have submitted a plan that would significantly decrease military pay raises beginning in 2015. Currently, raises are determined according to the Employment Cost Index, a Department of Labor statistic that measures the growth of private sector wages. Instead of using the ECI, officials are proposing a flat 0.5 percent raise in pay, followed by a 1 percent increase in 2016 and a 1.5 percent increase in 2017.

Here’s what these changes could mean to you:

Effectively a Pay Decrease

Over the last 10 years, military service members have consistently received pay increases above the ECI in order to reduce the salary gap between military personnel and their civilian counterparts. These policy changes have the potential to reestablish that separation, meaning a difference of thousands of dollars for military members and their families.

Raises will continue to be determined by the ECI for the next two years.  Service members can expect a 1.7 percent raise in 2013 and a similar increase in 2014.  According to the 2013 defense budget proposal, “Lower raises are delayed to give time for military personnel to accommodate these changes.”

Federal officials say they will not reduce or freeze pay and remain committed to maintaining an organization that attracts and retains quality personnel.

Cutting Costs

The Defense Department has been mandated to reduce spending by $500 billion over the next 10 years.  Personnel costs, which make up about a third of the total budget, have increased 90 percent since 2001. Limiting pay raises would help moderate these costs, saving an estimated $16.5 billion over five years, according to DOD estimates.

Other measures that have been discussed include:

  • Increasing out-of-pocket health care costs for military retirees
  • Large force reductions in the Army and Marine Corps
  • Possible closure of several stateside military bases

Defense officials have emphasized that these plans are years away and still subject to change.

Photo courtesy of stevendepolo