Differences in Cost of Living and Military Pay Growth for Army Personnel : RAND Corporation , April 1 , 2025
Differences in Cost of Living and Military Pay Growth for Army Personnel : RAND Corporation , April 1 , 2025
From the report: "In an effort to evaluate whether military compensation has been effective and efficient in addressing cost-of-living changes, we explore the extent to which military compensation growth has kept up with cost-of-living changes over time, across geographic areas, and across subgroups of soldiers. Cost-of-living changes are relevant not only because of concerns about military pay keeping its purchasing power during periods of inflation, as has been experienced since 2021, but also because the frequent moves made by military personnel mean that the purchasing power of pay may depend on where a member is assigned. As stated by the Seventh Quadrennial Review of Military Compensation in 1992,
A pay structure established to be attractive, motivating, and economical on average may be undermined by geographic variations in prices. The effects on the compensation system of local variations in prices should be minimized to prevent undermining the overall system. (Office of the Assistant Secretary of Defense, Force Management and Personnel, 1992, p. 23)
In this report, we compute the trends in changes to cost of living and pay for Army personnel from 2018 to 2022 and examine subgroup differences and geographic variations. The study relied on Army personnel and pay data provided by the Defense Manpower Data Center and cost-of-living data provided by the Council for Community and Economic Research (C2ER). The latter dataset includes a quarterly cost-of-living index (COLI) since 1992 for more than 300 locations in the United States. We constructed a COLI for each soldier reflecting that soldier’s cost of living where they live and shop, adjusted for access to and savings associated with military commissaries. Because of limitations with these COLI data, we also used tabulations from the Office of the Secretary of Defense to compute the military’s annual Cost of Living Allowance in the continental United States (CONUS COLA, referred to as COLA data in this report), as well as basic allowance for housing (BAH) data. These COLA data also have limitations, so we used them to assess the robustness of our findings using the C2ER COLI data and alternative methods of measuring cost of living. To measure pay growth, we considered basic pay, the BAH, the basic allowance for subsistence, and CONUS COLA for each soldier in each year."
Authors - Asch, Beth J., Wang, JesseRelated Resources
