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Since combat-related skills have no private sector equivalents, the young marine crossing a Vietnamese rice paddy on his way to work in the morning could be considered “unskilled” and therefore paid at minimum wage. Doesn't seem fair does it?
In 1776, General George Washington advised the Continental Congress on the need for adequate pay for the troops as necessary to . . induce men of character to engage.” More importantly, Washington thought “something is due to the man who puts his life in his'hands, hazards his health, and forsakes the sweets of domestic enjoyments.” With these words, he framed the question still debated today: how much money should be paid to attract and keep good people?
In the past two years, Congress has restored military pay to a level roughly comparable to the private sector. This improved pay has been a contributing factor to current enlistment and retention successes, leading in turn to increased personnel stability and an upward trend in unit combat readiness. Now, critics of recent pay and bonus increases claim that a disproportionate 14% more ($6 billion) was spent in fiscal year 1982 to support a 1% strength growth of about 28,000 servicemembers. Secretary of Defense Caspar Weinberger counters that present defense manpower costs compare favorably with those of labor-intensive industries in the private sector.1
Nevertheless, the cost of military personnel has risen rather dramatically, focusing attention on ways to limit further increases. This interest frequently centers on the fact that recruiting goals have been met, while service chiefs continue to assert that shortages in specific skills and grades persist.
Hot on the scent of an old idea, Congress has now unleashed its investigative bloodhounds from the General Accounting Office (GAO) to harangue the services into targeting base pay according to skill in order to resolve occupational imbalances. The interest in this idea is prompted by the belief that across-the-board pay raises are more costly than targeted increases.2 The unstated assumption here is that if raises are targeted only to shortage skills, it isn’t necessary to fund raises for everybody.
This argument is usually accompanied by the assertion that across-the-board raises aggravate skill imbalance problems by providing an incentive for individuals to remain in overage occupations. Again, the belief is based on the unsubstantiated assumption that occupational imbalances are responsive to market forces. That is, individuals will cross occupational boundaries in response to differential wage scales. To believe this, one must also believe that military manpower supply is a function of one variable: money. This perspective ineluctably leads to the conclusion that if private industry prices labor according to demand, the Department of Defense should do likewise, thereby emulating the greater efficiency of the private sector.
If one accepts this line of reasoning, it does not require much imagination to conclude that Defense Department advocacy of across-the-board raises is both inefficient and shortsighted, and that raises targeted by skill will save money and help solve the occupational imbalance problem.
But such a conclusion is founded on the presumption that the military compensation structure should resemble private industrial compensation because both are fulfilling identical purposes. Such a perspective betrays a number of value judgments:
► Non-substitution of military labor. This notion is based on the example of the hospital surgical team, a highly integrated life-or-death group effort where team members play discrete roles and are paid at different rates according to skill. Proponents of targeted pay contend that what works in the operating room should also work in the military. To apply the surgical team paradigm, one must believe that there is an absolute division of labor in military units, and that each member of the military work force has only one skill he or she uses full-time. Through specialized experience, it follows that skill expertise and productivity increases, and that this is good and ought to be encouraged—thereby establishing a bias in favor of an older and more specialized work force. However, the belief in an absolute division of labor is usually applied to the armed forces in wholesale fashion, with only lip service given to the need for a young work force, cross-trained to operate multimission weapon platforms and conditioned to the uncertainties of combat. The reality of manning shortages in peacetime must also be considered. Consequently, career development as practiced in the armed forces goes against the notion of increasing specialization with age; each servicemember is intentionally exposed to a variety of career-broadening assignments in order to develop expertise in many areas.
► Military skills are equatable to civilian skills. Since analysts have yet to devise a way to factor in the differences between civilian and military skills that do exist, it is simply easier to assume away all military aspects of duty as irrelevant for the purposes of analysis. For example, combat-related skills (e.g., the infantry) have no private sector equivalents and tend to be categorized as "unskilled'' and therefore paid at minimum wage.
► The performance of military units is always equal to the sum of their individual parts. By concentrating on individual skill management, it is simpler for analysts to conclude that units will achieve maximum performance when perfectly staffed according to occupational requirements. But this sort of instrumental reasoning is refuted by daily reality. Ask any commander, and he will maintain that his unit is better or worse than the sum of its parts and rarely exactly equal. Intangibles, such as leadership, cohesion, morale, and training, as well as tangible factors, such as the availability of materiel resources, play a part in the complex amalgam known as unit effectiveness. As the record shows, units in combat can achieve a high degree of efficiency, even though understrength in total or in specific skills. They are more effective than the sum of their individual parts.
These rationalizations skirt the imperatives of military service. They do not form the basis for a compelling argument that the military pay structure should resemble industrial compensation. Nevertheless, the idea persists that servicemembers should be paid according to skill.3
It may be instructive to observe that while private industry uses differential wage scales, skill imbalances in the civilian labor force are somewhat comparable to those in the armed forces—excesses of general laborers and shortages of skilled technicians. Moreover, the shortages of machinists and engineers have been plaguing industry for more than a decade with hardly any relief from supply and demand curves. The practice of targeting pay has not solved this long-standing problem.
More importantly, while industry pays machinists more than floor sweepers, generally accepted pay standards within occupational groups prevail. These standards have evolved to stabilize the work force and labor costs and to provide each employee with a predictable level of pay based on skill and years of experience. However, in the face of overwhelming demand, wage guidelines don't always apply, leading to a situation very much akin to the military’s personnel turbulence problem. In areas such as California’s "Silicon Valley,” intense bidding wars for electronics engineers and computer professionals have spawned annual job turnover rates of 80100%. This illustrates that the supply of private sector labor is not governed by the money variable alone, and when pay is targeted strictly in response to demand, instability is likely to result, with no assurance that the demand will be met.
In private enterprise, the individual’s skill forms the basis of his employment and his identity within the organization. In the armed forces, service identification takes a clear precedent over identification with skill. The military remains institutional in nature and unit-oriented, striving for maximum flexibility and interchangeability within the labor force. This perspective argues in favor of a common pay scale and largely explains the rationale for a basic pay system based on rank and years of service. If we take the proposition that pay should bear a relationship to the purpose of the organization, it is not imperative that the pay system supporting private productive enterprise should be grafted to an organization whose function is to fight wars.
This argument would lose much of its force if differential wages were solely responsible for the correction of skill imbalances. But they are not. In the short term, personnel in overstaffed occupations
may not migrate to shortage skills in direct accordance with the monetary rewards available, and for many reasons:
► Many excess individuals do not meet the frequently higher qualifications necessary for lateral movement to shortage skills.
► Many qualified people in overstaffed occupations do not desire retraining in shortage skills.
► Of greater importance, classroom capacity is frequently more limiting than the availability of volunteers for retraining, particularly since training budgets have traditionally taken a beating in the competition for defense dollars.
► Structure inversions can cause personnel shortages that no pay table adjustments will ever solve.
► Changing requirements can dramatically alter the inventory-structure imbalances.
Nevertheless, advocates of skill-targeted pay frequently point to the monies budgeted for personnel in fiscal year 1982, claiming that only about 4% ot the funds were targeted to skill shortages. This figure is based on the comparison of total outlays tor Personnel ($39 billion) to skill-related special pays ($1.6 billion). Counting the dollars this way frequently leads to the misperception that there is little distinction regarding how most people are paid. In truth, there are marked differences in income, largely driven by the nonuniform rates at which individuals in various skills progress through the common compensation table. This results from a host of variables, to include service differences in grade requirements and the experience mix in terms of years of service; moreover, between skills within each service there are differences in the mix of enlistment terms, attrition rates, promotion opportunities, and retention patterns. These variables impact on when individuals arrive at grade and year of service points, marking pay increases on the common pay table.
An examination of flow rates by skill through the present universal pay table reveals literally hundreds of differences. One pattern does seem to emerge. Individuals in a shortage skill would be expected to progress at a faster rate than those in an overage skill, leading to a larger income over a 20-year career. This pattern is evident in two Marine Corps occupations: aviation electronics repairmen (a shortage population) and infantrymen (a population with surpluses). We see that the average promotion points are different:
Grade | A viation Electronics Repairmen (Years) | Infantrymen (Years) |
E4 | 2.2 | 3.2 |
E5 | 3.7 | 4.4 |
E6 | 6.3 | 7.9 |
E7 | 10.4 | 12.4 |
E8 | 17.2 | 18.0 |
The different average promotion points lead to different incomes over 20 years; the typical aviation electronics repairman will earn about $10,000 (or 2.8%) more than his infantry counterpart.
When the effects of reenlistment bonuses are added, the cumulative income gap widens to an 11% difference (Figure 1). Even without these bonuses, the difference demonstrates that ”de facto” differences in pay by skill already exist; it explains why the Army publishes promotion opportunity to encourage lateral movement to shortage skills. The system is compensating for inventory imbalances by adjusting flow rates up the promotion ladder.4
The targeted-pay advocates are seeking both multiple ladders and varied flow rates.5 Such a compensation system, in which basic pay is targeted by skill, raises a number of difficult policy issues:
► Absence of freedom of choice: The invisible hand of the marketplace assumes freedom of choice on the part of the individual. While this is the basic premise on which the All-Volunteer Force is based, thousands enter each year on general service contracts, to be assigned occupations at service discretion. Differential pay by skill could create perceived inequities for these enlistees—based on their skill assignments, many equally qualified individuals would be penalized through assignments to lower-paying skills in accordance with the needs of the service. It is simply not always possible to assign the general- service enlistee the occupation of his choice; pay differences in the same cohort based on directed skill assignments will severely erode the fundamental pay equity that now exists.
► Different pay for simitar work: Differential pay scales could also lead to perceived inequities for individuals in different skills performing similar work. For example. Marine helicopter and fixed-wing hydraulics mechanics have different specialty codes, based on the need for expertise by aircraft type, although the work performed is roughly the same. Should helicopter mechanics be paid less because they are in excess? This penalizes the work force for management’s inability to balance supply with demand.
► Pay inversion problems: The application of skill- targeted pay raises, over a number of years, could aggravate potential pay inversion problems, particularly as one moves up the promotion ladder from shortage grades to more senior grades with balanced populations.
► Determining who will get paid more: How will shortage skills be identified? Given that the services do not employ a common standard of what constitutes a shortage skill, a commonly accepted definition for pay adjustment purposes will not be easily determined.
► Career broadening assignments: At any given moment, a limited number of individuals in shortage skills may be assigned to other requirements. These assignments are for career broadening purposes, such as the avionics technician assigned to recruiting duty, an activity which can directly contribute to solving skill shortages. On what basis will persons in this category be paid?
► Changing requirements: A skill that is "short” one year could be balanced the next, but sorting out the cause severely complicates the problem of measuring the effectiveness of targeted pay. In cases where shortages and overages result from changing requirements, targeted-pay adjustments would have the practical effect of penalizing individuals in skills with decreasing requirements (over which they have no control). The potential effects on morale and retention could be quite significant.
► Shifting imbalances: Even if requirements hold constant, population overages and shortages can change rather dynamically within a short period of time as a result of shifting accession, retention, promotion, or training patterns.
A consistent problem emerges from these inevitable results of skill-targeted pay—it reduces basic compensation policy to that of chasing after skill shortages year by year, with annual adjustments to potentially hundreds of pay tables. The potential for confusion, error, and misunderstanding is infinite.
Skill-targeted pay schemes appear to stem from the failure to appreciate that the basic pay structure, with its annual raises applied to all skills, is not intended to reduce skill imbalances, but primarily to provide every serviceman with a predictable income based on service to country, and secondarily to provide a mechanism for maintaining pay comparability with the private sector in general.
To resolve particular skill imbalances, the services employ a number of specific management tools, to include monetary incentives such as enlistment bonuses for hard-to-recruit skills and reenlistment bonuses and continuation pays for hard-to-retain skills. These incentives can be adjusted easily on a quarterly basis to keep pace with occupational overages and shortages. The effectiveness of enlistment and reenlistment bonuses in meeting specific skill needs has been well documented—they work, and they enjoy a high degree of credibility. More importantly, each service is free to determine which skills are in greatest demand and the bonus incen-
tives to be applied to each.
These established incentives are contributing to favorable trends in each of the services. If the present momentum is maintained, the Army’s top five NCO shortages (E5-E9) may be eliminated by the end of fiscal year 1983. Many Air Force occupations now manned at 82% in the middle NCO grades are expected to improve to 96% manning by the end of fiscal year 1984. The Navy is also making steady progress, anticipating a reduction in its “top five” to shortfall to 15,000 by the end of fiscal year 1987.
With workable targeting mechanisms in place, bonuses and special pays have proven to be effective in reducing shortages, without adverse side effects. Consequently, more targeting mechanisms are coming into use. Sea and submarine pay, aviation officer continuation pay, and space-imbalanced skill pay— which offers a stipend to individuals in shortage skills who extend their overseas tours—are all targeting mechanisms that have worked as expected. These aggressively managed programs have enabled the services to address manning problems by skill, type of duty, and region, while preserving the institutional nature of the basic compensation system. This system is based on the philosophy that the servicemember’s primary function is military, and that this function is equally important for each service and grade, regardless of the individual’s particular specialization.
We have learned through painful experience that on-again, off-again weapon systems invariably take longer to procure, and always at greater cost. Now, multi-year funding is saving money and accelerating weapon deliveries to the field. There is a lesson here that applies with equal force to manpower—the skill shortage problem is best solved through multi-year program and funding stability. But manpower budgets submitted to Congress tend to survive about as long as snowflakes on hot asphalt. Oftentimes, arbitrary cuts lead to inefficiencies that may eventually cost more than the monies saved in the short run.
In fairness to Congress, however, the Defense Department has provided only minimal information regarding the magnitude of the skill imbalance problem and the amount of progress that has been made to reduce it. Congress is understandably wary of spending a billion dollars a year on continuation Pays and reenlistment bonuses when they are occasionally applied to skills where shortages don t exist, and their effect on reducing shortages has been inconsistently documented.6 Additionally, the impact of these expenditures on readiness has been affirmed in only the most general terms. A better job of “selling” the bonus and continuation pays now in effect could lead to the funding continuity the services need for sustained congressional support. Documenting what does work will also serve to parry proposals to discard the present compensation system in favor of skill-targeted pay modeled after the private industrial sector.
We should not forget that in wartime all-volunteer manning will be discontinued, to be replaced by the draft. Consequently, many of the special pays will be discontinued as no longer needed or relevant.
Thus, we are led to the foremost principle justifying the uniform pay table; the military compensation system must transition smoothly and operate effectively in both peace and war. The shift from a targeted peacetime pay system to a uniform one in wartime would be neither smooth nor uncomplicated. More importantly, to retain a skill-targeted system in wartime obscures the reason why service members wear the uniform, which is to distinguish them from noncombatants. As armed combatants, their principal liability is to combat and secondarily to occupational specialization.
The military’s reluctance to adopt a skill-targeted pay system has a rational basis. The present compensation structure exists within the broad framework of military necessity and operations. General John W. Vessey, Jr., Chairman of the Joint Chiefs of Staff, frequently tells his staff officers something that certainly applies to the existing pay system, “If it isn’t broken, don’t try to fix it.” 'Secretary of Defense, Annual Report to the Congress. Fiscal Year 1983, 8 February 1982. p. 27.
^''Defense Budget Increases: How Well Are They Planned & Spent?" U.S. General Accounting Office. Washington, D.C.. 13 April 1982. Pages 50-55 of this report capture the essence of the GAO argument in favor of skill-targeted base pay.
'GAO recently affirmed, "We do not believe that the traditional ... approach ... of managing all personnel alike can be justified at the high . . . cost .... Simply put. this is a question of whether targeted or across- the-board solutions are appropriate for countering Service manpower problems." See "GAO Plans investigation of Military Pay Systems. " Navy Times, I November 1982. p. 12.
JIn combination with bonuses, it works; in the past two years the Marine Corps has reduced its enlisted imbalances by almost 4097.
'In the parlance of missile technicians, they propose to MIRV the pay table through Multiple Independent Reimbursement Variations (MIRV). ‘An excellent critique of the Navy's management of Aviation Officer Continuation Pay (AOCP) is contained in "Retention Bonuses." Aviation Week & Space Technology, I November 1982. p. 100.
Author’s Note: The author wishes to recognize the contribution of Mr. Peter K. Ogloblin, Compensation Directorate, Office oj the Secretary of Defense (Manpower, Reserve Affairs, and Logistics), in the preparation of this article. Mr. Ogloblin stands as one of the most articulate advocates of the present basic compensation system.
Commissioned through the NROTC in 1966. Colonel Evans served in Vietnam as an artillery officer and a variety of command and staff postions since. He served in the Manpower Department at Headquarters Marine Corps from 1978-1981: he is now on duty at the Pentagon as a manpower analyst in the Office of the Secretary of Defense (Manpower, Reserve Affairs, and Logistics).