Why the U.S. Must Reform the Military Personnel System

By Mieke Eoyang and Ben Freeman

The military personnel management system is a Cold War relic populated by a 21st century workforce. Left unchecked, this growing disconnect between employment opportunities in the armed services and the private sector will hinder the military’s ability to recruit the best the nation has to offer, and that undermines national security.

While the recommendations of the Military Compensation and Retirement Modernization Commission’s (MCRMC) final report, released in late January, are laudable, the commission’s mandate was not broad enough to fully address this fundamental challenge of a military personnel system that increasingly doesn’t match the expectations of today’s workforce.

The fact is that 83 percent of military personnel will never see a dime of retirement pay because they leave the military before serving the requisite 20 years, while their peers in the private sector rack up hundreds-of-thousands of dollars in 401(k) retirement plans that move with them when they change jobs. Those same peers have choices about their careers and are able to stay in one location or move based on the best job options available to the family while military personnel are typically forced to move their entire family every three years, regardless of their spouse’s career prospects, children’s education or housing situations.

We’ve identified three policy options that put us on the path to a more modern military. These are not small changes. But if our military hopes to continue employing the best and brightest, it needs to consider fundamentally changing the military personnel system, not merely tinker with pay and benefits.

As the MCRMC’s interim report noted, the services recruit and retain personnel through a “closed” system, “in which service members are generally promoted from a pool of more junior members already in that system.” A closed system ensures greater uniformity of culture, which improves efficiency for management, but also has significant drawbacks in managing for talent.

This system makes it impossible to capture talent that may have begun on a different career path, and difficult to recapture personnel who left the military to acquire valuable talents elsewhere. For example, if you’re a mid-career wizard of Silicon Valley and want to do your part to fill the growing need for cyber professionals in the U.S. military, your only option is to effectively restart your career as an entry-level officer. Needless to say, this isn’t very enticing for a highly educated professional who’s likely earning a six-figure salary.

More importantly, it denies the military all the skills mid-career professionals like this could bring to bear. Any large organization — and with more than 2.2 million service members the military certainly qualifies as large — that exclusively recruits leaders internally is foregoing all the benefits that could be provided by the incredibly dynamic civilian workforce.

While they might lack experience at military academies or commanding troops on the battlefield, they might have unrivaled experience elsewhere — like managing logistics for UPS, working in the trauma unit of a hospital emergency room or running a large supply chain for a multinational company — that could be incredibly valuable to the military.

Also problematic: The current system encourages military members with skills that are highly sought after in the private sector to leave for good. As the MCRMC notes, since the start of the all-volunteer force there has been “a sustained increase in the overall education of service members, creating a far more professional and technologically fluent force.” These trends make service-members more desirable in the private sector and the military currently has few on-ramps back into active-duty service once service members leave. And, the options currently available — like the Air Force’s Career Intermission Pilot Program that offers airmen up to a three-year sabbatical — are extremely underutilized.

Opening the recruitment system would have the added benefit of reducing the growing civilian-military divide, which has grave consequences for both the military and the nation, as James Fallows recently noted in The Atlantic: The Guard and Reserves provide this vital link between the civilian and military employment silos, but this does nothing to change the fact that the active-duty military is not fully benefiting from the immensely talented, 155 million person strong civilian U.S. workforce. Opening this system will ensure that the military can recruit the very best, regardless of whether they’re in or outside the military.

Every three years, on average, service members are asked to completely uproot their lives. When the all-volunteer force began this was less of a problem because nearly 98 percent of service members were men, the vast majority of whom were not married and didn’t have children. Those that had families often had a wife who was a full-time caregiver, rather than being employed outside the home. Today, the story is very different. According to the MCRMC: One in six active-duty officers is a woman; 55 percent of the active duty force is married, including 68 percent of all officers and; 71 percent of military families have children.

In addition, 70 percent of women with children at home are in the labor force. While the military’s rotation system might have worked for military families more than 40 years ago, it doesn’t work today. In addition to the stress and bureaucratic red tape that service members endure, their spouses are often forced to find new jobs and their children must attend different schools. Needless to say, this can lead to financial hardships if spouses can’t quickly find work, not to mention the emotional toll that loss of community takes on the children. After all, moving is one of the leading causes of stress in the United States.

On top of the stress placed on military families, these repeated rotations are incredibly costly and hinder military effectiveness. The RAND Corp. found that consolidating troops at fewer, but larger, bases would provide significant savings to the military. Similarly, a Center for Naval Analysis report concludes that the current rotation policies “increase turnover and directly reduce performance.” The problem, according to a former Air Force officer, is “Mid-level officers rotate in and out of jobs so fast that they are not operationally optimized, and that merry-go-round costs lives.”

Instead of continuing this costly, psychologically taxing system, the military should adopt a “home-basing” policy where service members are stationed longer (up to six years) at their designated home base. Tours of duty away from that home base would be limited to a maximum of two years, after which time they would return back to the home base. This will allow families to better integrate into communities, allow spouses to build career equity and provide stability for their children. Such a policy would also reduce wasteful relocation expenses incurred by the military.

To a certain extent, the Navy already has home bases, like the extremely large bases at Norfolk, Virginia and Pearl Harbor, Hawaii. However, all the forces, and especially the Army, could benefit immensely from pursuing “home basing.”

The military offers one of the most generous retirement plans in the United States, but only to those who qualify for it. For the 17 percent of military members who stay to qualify for retirement, they receive benefits that are increasingly rare in American society. After 20 years of employment, service members can retire and receive 50 percent of their basic pay for the rest of their life. Unlike civilian retirement plans, service-members aren’t required to pay any portion of their retirement benefit and the benefit amount is guaranteed for life and increases annually with cost of living adjustments. Unlike most other defined benefit plans, there is also no age restriction, so someone that enlists at age 18 could retire from the military at 38 and receive half of their military pay until the day they die.

In addition to a defined-benefit pension, military retirees are eligible to receive subsidized health care for the rest of their lives. This is on top of any other income they earn. Many military retirees start second careers in their late thirties and early forties allowing them to earn a full paycheck on top of their military retirement pay. In these second careers they can also build equity in a private sector retirement plan, which they can then use in addition to their military retirement pay when they fully retire from all public and private work.

While this remarkable level of financial security is very attractive to many, the military also incentivizes service members to stay long after 20 years of service. For every year of service beyond 20 years, a service members’ retirement pay increases by 2.5 percent of their basic pay. Thus, a service-member retiring after 30 years of service receives 75 percent of their basic pay.

Needless to say, the military offers an extraordinary retirement package with immense rewards for those that commit to military service for 20 or more years. The problem is that few veterans actually get to enjoy it. In fact, 83 percent of those that serve in the military never see a dime in retirement pay because they leave the military before reaching the 20-year mark.

Fortunately, there’s a simple solution: abolish the current defined-benefit pension in favor of a 401(k) style plan with immediate vesting that guarantees every member of the military will receive at least some retirement pay. Such a plan already has wide bipartisan support from groups as diverse as the Heritage Foundation and the Center for American Progress. Unlike the MCRMC —which advocated for a similar plan, but also opted to keep the defined benefit too — moving all resources to a 401(k) style plan would ensure equitable retirement benefits for all those who serve, not just those who serve the longest.

Making this retirement benefit fully portable between the active duty, reserve components and the private sector would also provide greater career flexibility for military service members.

Another key to this proposal is improving the military’s ability to financially incentivize service members with specialized skill sets — like nuclear engineers, for example — to continue serving. As the MCRMC noted, “the services expressed their desire to retain (and potentially increase) the flexibility of special and incentive pays to enable them to adjust the compensation package to changing economic environments and service requirements.” Without a gold-plated retirement package waiting at 20 years, providing these special and incentive pays will be essential for retaining personnel the military needs.

Given the tight fiscal environment and dramatic changes in the U.S. workforce, now is an ideal time to adapt the military personnel system to the realities of the 21st century. Maintaining the status quo of an antiquated, Cold War-era personnel system guarantees the U.S. military will fail to recruit and retain the men and women that could prove to be essential for winning the next war. Failing to act is failing to provide the military with its most vital resource: people.

Making the military a better place to work will save taxpayers money and improve the quality of life for our men and women in uniform, while ensuring that the military continues to attract the very best the nation has to offer. This is a win for our men and women in uniform and for the country. Modernizing the military personnel system can’t just be a priority for human resources professionals at the Pentagon; it must be a national security priority.

Mieke Eoyang is director of the national security program at the centrist think tank Third Way. Ben Freeman is a senior policy advisor.

Topics: Defense Department, DOD Policy

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