COMP NEWS – US military servicemembers are about to get their biggest pay raise in two decades – and it may increase even more thanks to inflation.

Servicemembers are in line for their biggest pay raise since 2003 next January, but lawmakers and advocates are questioning whether that will be adequate to keep military families in good financial health.

That’s because the formula used to calculate annual pay hikes doesn’t take into account issues like short-term inflation spikes. The Congressional Budget Office has predicted a 6.1% jump in the consumer price index this year, but none of that extra expense is built into the military pay raise formula.

The total compensation increase is set to be deliberated by legislators, with concerns that rapid inflation will not offset cost-of-living increases in pay.

The pay raise dilemma is expected to gain extra attention next week as the House Armed Services Committee unveils the first draft of the annual defense authorization bill, a sweeping military policy measure that contains language setting military pay rates.

The White House earlier this year proposed a 4.6% raise for troops, but House members have already hinted they may be looking at a significantly higher mark out of concern that pay levels may not be sufficiently robust to meet recruiting and retention targets.

While the total military compensation package includes things like housing allowances and medical benefits, advocates have long argued that military pay plays a critical role in force health because it affects nearly every aspect of troops’ financial lives.

Total compensation raises year-to-year based on a federal formula as well as fluctuating economic conditions.

This year’s pay raise was 2.6%, equal to what the federal formula said it should be based on economic conditions in fall 2020.

For junior enlisted troops, it means about $670 more this year in take-home pay. For senior enlisted and junior officers, the hike equals about $1,300 more. For an O-4 with 12 years service, it’s more than $2,300 extra.

Those are significant boosts, but might not be enough to offset higher gas and grocery costs seen by many military families in recent months. The Labor Department said the inflation rate for the 12-month period ending May 1 was 8.3%.

To read more about the US military’s biggest pay raise in 20 years, click here.

For more Comp News, see our recent posts.


Comp News by CompXL

Comp News is brought to you by CompXL, the flexible compensation software provider that enables mid- to large-size organizations to implement competitive pay structures such as merit-based compensation and pay-for-performance rewards.