One could take a lawn-mower approach to scaling back military compensation: cutting whatever grows fastest and sticks out above the rest. Indeed, this month’s budget request by the Pentagon calls for cuts in fast-expanding benefits, specifically health care and basic pay, to reduce costs. But are these forms of compensation the right ones to trim? Do the proposed reductions consider the impact on the all-volunteer force? Without answers to these questions, Congress may understandably be reluctant to act.
The question the Defense Department should be asking is not how to cut costs, but how to get better value for each dollar spent. To that end, it should consider which forms of compensation are most important to service members and the trade-offs they make among them.
Do they prefer cash compensation over benefits such as health care, and by how much? Do they like tuition assistance more than extra vacation days? Most important, do service members value benefits commensurate with what it costs the government to provide them? With such information, cuts can be aimed at the benefits troops value least, minimizing the negative effects on service members.
Reducing the cost of military compensation does not have to be all pain with no gain. Some portion of the savings from cutting the least desired benefits can be reinvested in areas that service members prefer. Thus, the military could maintain or even improve the total value of its compensation system as perceived by service members while reducing overall costs. This approach has been used successfully in the private sector for years.
Last year, the Center for Strategic and Budgetary Assessments conducted a study in collaboration with TrueChoice Solutions asking some 2,600 current and former service members about different levels of 10 forms of compensation. While this trial study was no substitute for a larger, randomized study performed by the Defense Department, the preliminary results were revealing.
Previously, I supported cutting benefits such as military exchanges and commissaries — military-operated stores offering general merchandise and groceries. In a Wal-Mart and Target world, they seemed like an outdated and inefficient form of compensation, and cutting them could save more than $1.5 billion per year. Our study, however, suggested that a majority of service members from all ranks and age groups value the exchanges as much or more than they cost to provide. It turns out that these stores are a good value as a form of compensation.
Another surprise was how much service members disliked the idea of a performance-based bonus. In our study, opinions of such a bonus varied most significantly by age groups, with younger service members, ages 18 to 29, preferring it more than older ones. But that young age group valued it at only a fraction of what it would cost to implement. And the 50-and-older age group actually considered it equivalent to a pay cut. This suggests that, contrary to the recommendations of independent panels and scores of experts, a performance-based bonus would not be a good use of resources.
Military entitlement reform should not simply be about reducing costs. Before making decisions on which areas to cut, the Defense Department must better understand the preferences of service members. It should reach out and collect data using modern and readily available analytical tools.
This approach should inform decisions, not dictate them. Other imperatives, such as ensuring that all members of the military receive adequate health care, must also play into any choices, even if it means continuing to fund benefits that service members undervalue.
A preference-based approach would be smart even if the budget were increasing; it always makes sense to consider the needs and desires of the people you’re serving. But too often, it takes a crisis to focus the mind and force change. The Pentagon should capitalize on the current budget turmoil to modernize its compensation system, along with the methods used to evaluate it. The Defense Department can do better, the troops deserve better, and the future of America’s all-volunteer military depends on it.