Proposed 2.6% Military Pay Raise The Largest in Almost a Decade

The Trump Administration released its proposed FY2019 budget last month, which included discussions about federal retirement benefits and pay raises for military employees. The current budget proposes a 2.6% increase in pay for military personnel in 2019, an increase from the current approved military pay raise of 2.4% in 2018.

According to the website Task and Purpose, a 2.6% increase would be the largest military pay raise in nine years and is proposed as an effort to keep the armed forces competitive with the private sector. While the American armed forces is one of the largest employers in the nation, it needs recruitment to stay competitive.

While military pay typically isn’t a partisan issue, economic experts on both sides of the aisle are hotly debating what this increase means for total personnel pay and the state of the 2019 economy. 

Current Events Play a Role in Proposed Pay Raises

Recent political turmoil is a significant factor in the proposed military pay raise for FY2019. CNN reports that the Pentagon asked for a total budget of $686 billion for 2019, one of the largest in United States history and an $80 billion increase from 2017. The Pentagon cited concerns related to Russia and China when proposing the budget, saying the United States needs to be prepared as social and economic tensions rise between the three countries.

If the United States needs to increase its military force, then it needs to recruit more people. If the world seems closer to war, and there’s a seemingly increased chance that soldiers will see direct combat, then they may be less likely to join the armed forces. By increasing compensation, the government is able to make military service seem more alluring and help potential recruits overcome concerns about losing life or limb, boosting recruitment numbers.

Not Everyone Is Happy About the Military Pay Raise

While most military personnel would gladly accept this significant pay increase, economic experts have expressed concern over the trend of growing military pay faster than other federal positions and the private sector as a whole.

According to Federal News Radio, compensation for military personnel increased 52% between 2002 and 2010. This means compensation rates and inflation adjustments have grown much faster for military personnel than in the private sector. Experts estimate that the Defense Department could save $25 billion over 10 years if the pay raises slowed down and matched normal inflation increases and growth.

Furthermore, personnel costs have increased 46% since 2000, and 42% of that growth comes from basic pay and benefits and housing.

For reference, this year’s proposed military budget is $686 billion. In 2014, personnel costs were $142.3 billion. This year, personnel costs are likely 20-30% of the entire proposed budget. A 2.6% raise might seem small, especially when it concerns one soldier’s take-home pay, but it adds up to become a significant part of the entire budget. 

A proposed 2.6% military pay increase would be the largest in 9 years and is proposed as an effort to keep the armed forces competitive with the private sector.Click To Tweet

Military Raise Lacks Civilian Pay Parity

There’s an additional reason some people are concerned about the 2.6% raise: civilian pay raises are frozen in the FY2019 budget proposal, meaning most federal employees won’t receive any raise at all next year.

Political experts are divided on whether or not civilian federal workers and military personnel should receive equal pay increases each year. If a pay raise for service members is meant to fight against inflation, then wouldn’t civilian employees experience the same inflation levels? If the pay increase is meant to make recruitment more competitive with the private sector, wouldn’t federal agencies also need to recruit top talent?   

Others argue that military members need higher pay raises that civilians because they put their lives on the line. In the same way that the government cares for police officers and firefighters, military members need special compensation and benefits for risking their lives for the country.

Whichever way you look at it, the civilian pay freeze could dictate whether the military pay raise gets approved. Congress might vote to lower it in order to give civilian employees at least somewhat of a raise in FY2019.

Plan for Whatever Pay Raise Gets Approved

While most military personnel are hoping for a 2.6% pay raise, most are cautious about what will actually get approved. Regardless of your pay raise this year, we’re here to help. Find a benefits specialist near you and request a free consultation to review your finances. We can look at the military benefits you currently receive and find ways to maximize them in the future.

If the FY2019 military pay raise is approved, you want to make sure you’re making the most of it. This means increasing the amount you contribute to your TSP or FERS to help you save for retirement.

Don’t put off benefits planning until you’re ready to retire. Contact us today to make sure you’re ready when the time comes.