How the military pay raise is set

Military basic pay is a table by pay grade and years of service, set under section 203 of title 37 and described in how military pay is structured. The table changes on January 1 each year, and the size of the change is fixed by a formula in section 1009 that resembles, but is not identical to, the one for federal civilian pay.

The formula

Section 1009 requires an increase in basic pay on January 1 of each year, with the force and effect of law, and requires that it be the same percentage for every member. That percentage is the growth in the ECI from the base quarter two years before the preceding year to the base quarter of the year before it, rounded to the nearest tenth of a percent. In this section “ECI” means the BLS quarterly Employment Cost Index for private industry wages and salaries, and a “base quarter” is a July-to-September quarter.

In practice the raise taking effect in a given January reflects the twelve-month ECI change measured through the September of the year before last. The lag exists because the figure has to be known in time for the budget cycle. The ECI trend page carries the series; wage growth and the ECI explains why BLS built an index that holds the mix of jobs constant, which is what makes it usable as a pay escalator.

How it differs from the civilian formula

The General Schedule formula in section 5303 of title 5 subtracts half a percentage point from the ECI change; section 1009 does not. All else being equal, the statutory military raise equals ECI growth while the statutory civilian base raise runs half a point under it. The two also attach to different things: the military figure moves the whole basic pay table, while the civilian figure moves only base pay, with locality percentages set separately. How the federal pay raise is set covers the civilian side.

Statutory add-ons

Congress has written exceptions into the section itself. Subsection (c)(2) provided that the increases for fiscal years 2004, 2005 and 2006 would be one-half of one percentage point higher than the formula produced. That text remains in the statute as a record of how a legislated departure looks: Congress amends section 1009 or sets the figure directly in the annual defense authorization, and the legislated number displaces the formula for that year.

The alternative plan

Subsection (e) gives the President the same escape valve the civilian statute does. When he judges the formula raise inappropriate on grounds of national emergency or of serious economic conditions affecting the general welfare, he transmits an alternative plan to Congress, with reasons, by the end of August of the preceding year. The measures he is to weigh are spelled out, from the leading indicators and gross domestic product through unemployment, the deficit, the price indexes, the ECI and the personal consumption deflator. The plan must assess the effect on the services’ ability to recruit and retain. Congress can override an alternative plan by legislating the figure.

What the raise applies to

Section 1009 adjusts the rates of monthly basic pay under section 203(a). It does not by its own terms set the housing allowance, the subsistence allowance or special and incentive pays, which have their own authorities and their own annual changes. Subsection (d) adds a separate protection: a member temporarily assigned away from a permanent duty station, or to field conditions, may not see the daily value of basic pay, subsistence and housing allowances together fall below what it was the day before the assignment.

Reading the result

A published raise is one number for everyone, so it says nothing about how a particular member’s pay changed; moving up a year-of-service band or a grade changes pay by more than the annual adjustment does. Comparisons with civilian wages should start from basic pay plus allowances, not basic pay alone, and the occupation tables used for the comparison are straight-time wages without benefits, measured around May rather than January. The state tables add the geographic dimension that a national pay table does not have.

What this page does not do

It does not reproduce the pay table or state the current year’s percentage; the Defense Finance and Accounting Service publishes the table each year, and the figure for any year is in that year’s authorization act.