JANUARY 2015
POLICY BRIEF
MILITARY COMPENSATION AND
RETIREMENT MODERNIZATION:
A Primer
By Phillip Carter and Katherine Kidder
T
oday’s U.S. military includes
approximately 1.4 million men and
women on active duty and another 1.1 million
serving in the Reserves and National Guard.
Since the creation of the All-Volunteer Force
(AVF) in 1973, the Department of Defense
(DOD) has relied primarily on financial
incentives, including compensation and
nonmonetary benefits such as housing and health
care, to recruit and retain the AVF. This reliance
has placed a premium on the department’s ability
to calibrate its financial incentives to build and
maintain a ready force, properly support those in
uniform and their families, and compete with a
dynamic domestic economy.
Military compensation stands at an inection
point today. Intense scal pressure both inside
and outside the DOD budget touches the military
personnel accounts.
1
Demographic changes within
the force (and the broader population of dependents
and retirees supported by military compensation)
add further pressure to the debate, particularly
surrounding housing benets and health care.
e winding down of operations in Iraq and
Afghanistan aects the compensation calculus,
particularly surrounding recruiting and retention
incentives. Beyond the military, changes in the
civilian labor market are aecting the relevance
and competitiveness of military compensation and
its ability to attract and keep the best and brightest
in uniform.
In 2013, Congress mandated the creation of
a Military Compensation and Retirement
Modernization Commission (MCRMC) to study
these trends and make recommendations to “ensure
the long-term viability of the All-Volunteer Force.”
2
Aer approximately 18 months of fact-nding and
deliberation, the MCRMC is poised to release its
ndings and recommendations to DOD, Congress
and President Barack Obama in early February.
is report will likely spark a debate over military
pay and benets that will continue throughout 2015
and 2016 as Congress, the president and the ser-
vices struggle to reconcile competing demands for
increasingly scarce scal resources.
is policy brief proposes a new framework for
how the services, DOD, Congress and the admin-
istration can use the commission’s ndings and
recommendations as a way to fundamentally
