Each year, unless Congress or the President intervenes, military pay automatically adjusts based on the Employment Cost Index (ECI), which measures the growth in private industry wages and salaries. On January 1, 2020, all rates in the basic pay table will increase by 3.1 percent based on the ECI figure that the Bureau of Labor Statistics (BLS) reported in October 2018 for the 12-months ending in September 2018. And, since this October the BLS reported the ECI for the 12-months ending September 2019, we already know the statutory rate of increase for the 2021 pay table is 3.0 percent. If we compare military pay increases with social security cost of living adjustments, which are based on changes in consumer prices, we see that over the past 10 years, military pay increases are outpacing inflation. In other words, military salaries, like civilian wages, are rising in real terms. So what could be bad about this?
For years, the argument raged that military members were being paid less than their civilian counterparts. Proponents of this argument claimed that this disparity was making it difficult to recruit and retain an all-volunteer force. And, with the ongoing pace of worldwide military operations, many feel compelled to show their support for servicemembers through higher pay and benefits.
Based largely on the work of the 9th Quadrennial Review of Military Compensation, which determined that military pay had not “kept pace with compensation levels in the private sector,” Congress enacted a series of pay raises to close the gap between military and civilian wages. And, to prevent future gaps from developing, Congress linked the growth in military wages to civilian wages via the ECI.
Because military pay is tied to the ECI, civilian wage increases drive commensurate increases in military pay. This helps retain an all-volunteer force that may be more inclined to leave military service if civilian wages were to increase at a faster rate. But, real increases in civilian pay reflect productivity growth. If the military matches those wage increases without commensurate increases in military productivity, we end up paying more each year for the same amount of output. The “technical” term for this problem is cost disease.
The cure to cost disease is to ensure that military members are becoming more productive. This means providing members with the training, equipment, leadership, process improvements, and incentives that companies are using to increase productivity. The military needs to introduce labor-saving technology to ensure that its workforce is doing tasks that require human intervention. For example, Amazon is able to pay its warehouse employees a premium salary and extend generous benefits because it invests heavily in automation and robotics to make these workers more productive than their competitors’ workers.
But, before we even begin to make workers more productive, we should understand how military labor contributes to the main product of the Department of Defense: readiness. Though the Department has a framework that lists the factors (DOTMLPF-P), which combine to produce military capability, we need to understand across the military’s many and disparate lines of effort how each factor contributes (in combination with the other factors) to the production of defense capability. We need to measure productivity and determine what makes people productive.
In the private sector, improving operational efficiency is an imperative. Hence, they invest significant resources in measuring and understanding not only what to produce but how to produce efficiently. In some industries, the production method itself is the distinctive advantage that defines winners and losers in the industry. And, because labor is a costly input to production, employers do all they can to ensure that workers’ time is not wasted. Companies have developed advanced means to track how employees spend their time and quickly adopt tools and policies to enhance productivity. And, while the military is certainly not a business, using taxpayer resources wisely for the provision of national defense contributes directly to the strength of our nation.
The military has made efforts to use its personnel efficiently. The services use various techniques to establish “manpower requirements” to employ the minimum amount of manpower to accomplish their missions. Yet, in focusing on the numbers of people (i.e., end strength or military headcount), we neglect the imperative to organize and equip to “provide maximum effectiveness and combat power.” The inefficient use of military personnel results from misaligned incentives and risk aversion.
Because military productivity is poorly understood and measured, leaders are not directly assessed based on how well they employ personnel. And, in some cases, leaders have an incentive to preserve the number of people under their command. When the number of assigned personnel determines the echelon of command and availability of supporting resources, commanders are not inclined to reduce headcount within their organizations. Furthermore, many of the labor-saving technologies employed in the private sector are expressly prohibited by those who control computing resources. Those responsible for preserving network security are averse to introducing risk in their area of responsibility and are not rewarded for efficiency gains in other areas. Hence, the military is way behind in deploying mobile devices with custom applications designed to boost worker productivity.
Once the Department understands how to measure and improve servicemember productivity, leaders should be assessed and rewarded for using personnel more efficiently. Furthermore, as an enterprise, the Department needs to keep pace with private industry. When companies introduce advanced technology, the military should embrace it quickly. Not only does this enhance the use of human capital, it keeps skills relevant which is important when servicemembers make the transition to civilian employment.
While we should not go back to a time where military wages failed to keep pace with civilian salaries, neither should we succumb to cost disease. We must invest in understanding and increasing labor productivity. Improving the productivity of service members directly improves our national security by ensuring the nation gets more security for the dollars it invests in defense. By properly aligning incentives and tempering unnecessary risk-avoiding behavior, the services can continue to maintain a robust all volunteer force despite increasing labor costs.
 37 U.S. Code §1009
 Nick Heath, “Amazon, Robots, and the Near-Future Rise-of-the Automated-Warehouse/,” Tech Republic, 6 January 2016.
 Doctrine, organization, training, materiel, leadership and education, personnel, facilities, and policy
 DODI 1100.4
The views expressed are those of the author and do not necessarily reflect the official policy or position of the U.S. Air Force, Department of Defense or the U.S. Government.
(Photo Credit: Fort Drum Public Affairs)