Defense Budget Adds 2.7% To Military Pay, And Why It’s Actually A Pay Cut

Members of Congress are crowing about a small increase in pay for service members included in the $768 Billion Defense Appropriations Act for 2022 signed into law by President Biden. In 2022, the Soldiers, Sailors, Marines, and Airmen of the United States Armed Forces will receive a 2.7% wage increase over 2021.  This is amid concerns about rising inflation. According to the Bureau of Labor Statistics, the annual inflation rate surged to 6.8% in November which is the highest since June of 1982.  In practical terms the rate of inflation is tied to the buying power of the dollar and means in 2021, your dollar bought 6.8% less than in 2021.  For service members, this means a pay cut in 2022. They are getting a 2.7% increase in pay that will buy 6.8% less than in 2021.

The Federal Reserve sets a target inflation rate of 2% year to year but the inflation rate has increased for nine consecutive months in 2022. Supply chain problems caused by COVID lockdowns, commodity prices, wage inflation to attract workers, and demand for consumer goods are all drivers of inflation.

Inflation Mean Service Members Pay More For Everything They Buy

For service members, the increase of the cost of goods will impact them directly in the things they buy most often.

Gas prices have increased 33%

Rent 3.8%

Food 6.1%

New vehicles 6.1%

Used vehicles 31.%

Clothing 5%

Social Security Recipients Received a 5.9% Cost Of Living Increase

In contrast to the military, the Social Security Administration has raised payments to recipients by 5.9% in an attempt to stay ahead of inflation.

President Biden’s Build It Back Better Plan is estimated to cost $2 Trillion with Congressional Budget Office estimates saying that it will go as high as $5 Trillion with adjustments. Democrats claim that the tax money spent by the government will reduce prices for the middle class while critics point to the doublespeak that taking more out of workers paychecks on the promise that they will spend less on other things, is just “Robbing Peter to pay Paul.”

A great deal of this money will be spent on jobs programs in green energy, infrastructure improvements, and combatting climate change. Over $100 Billion is being allocated for payments to illegal aliens including medical benefits. Money losing AMTRAC will receive $65 Billion. The average pay for AMTRAC workers is nearly $70,000 for a customer service representative and over $220,000 for a senior director. For comparison’s sake, an E-9, Master Chief Petty Officer in the Navy with 25 years of service receives about $67,000 a year.  A four-star General or Admiral is paid $189,000 a year with a pay cap.

Military Pay Is Tied To Retention.  Paying The Troops Less Drives Up Training Costs To Replace Them Every Few Years

Only about 25% of the defense budget is used for pay and benefits for service members and this spending is important in terms of Force retention.  A service member joining the military in 2021 received a 6.8% pay cut this year due to inflation.  If inflation continues at this pace it would mean after four years on active duty a service member will be making 28% less than if their wages kept pace with inflation.

That is a strong disincentive to remain in the military after your first enlistment not just for enlisted personnel, but also for officers.  In response to this “churn” of first-term service members leaving the military, the Pentagon would see a vast increase in the cost of recruiting and training new people. The Army spends $18,000 to put one soldier through boot camp, and a great deal more for secondary training.  In the Navy, those training costs are vastly increased for flight school, SEAL training, Submarine crew training, and nuclear propulsion programs and can amount to millions per trainee.

If service members look at their pay and realize that they are making less money(in terms of spending power) after four or six years of service than when they joined up, they are much less likely to re-enlist for another contract.