CONGRESSIONAL BUDGET OFFICE Douglas W. Elmendorf, Director

U.S. Congress

Washington, DC 20515

www.cbo.gov

January 20, 2011

Honorable Steny H. Hoyer 

Democratic Whip 

U.S. House of Representatives

Washington, DC 20515

Dear Congressman:

At your request, the Congressional Budget Office has prepared the attached analysis 

that compares federal civilian and military compensation packages. 

I hope that this information is helpful to you. If you have any questions, please 

contact me or CBO staff. The primary staff contact for this analysis is 

Carla Tighe Murray.

Sincerely, 

Douglas W. Elmendorf

Attachment

cc: Honorable Eric Cantor 

Majority Leader

Honorable Paul Ryan 

Chairman 

House Committee on the Budget

Honorable Chris Van Hollen 

Ranking Member

Honorable Kent Conrad 

Chairman

Senate Committee on the Budget
Honorable Steny H. Hoyer

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CBO

Honorable Jeff Sessions 

Ranking Member

Honorable Darrell Issa 

Chairman 

House Committee on Oversight and Government Reform

Honorable Elijah Cummings 

Ranking Member

Honorable Joseph I. Lieberman 

Chairman 

Senate Committee on Homeland Security and Governmental Affairs

Honorable Susan M. Collins 

Ranking Member

Honorable Howard P. McKeon 

Chairman 

House Committee on Armed Services

Honorable Adam Smith 

Ranking Member

Honorable Carl Levin 

Chairman 

Senate Committee on Armed Services 

Honorable John McCain

Ranking Member

Honorable Harold Rogers 

Chairman 

House Committee on Appropriations

Honorable Norman D. Dicks 

Ranking Member

Honorable Daniel K. Inouye 

Chairman 

Senate Committee on Appropriations

Honorable Thad Cochran 

Ranking Member
CONGRESSIONAL BUDGET OFFICE

Analysis of Federal Civilian and 

Military Compensation

January 20, 2011

To attract and retain the personnel it needs, the federal government must offer competitive compensation packages. For the military to recruit and retain qualified personnel, its compensation system must adequately reward service members for their 

training and skills as well as for the rigors of military life, particularly the prospect of 

wartime deployment. Federal agencies must also offer civilian employees a compensation package that will attract talented people to federal service and encourage the most 

highly skilled to remain, in the face of competing opportunities in the private sector. 

Policymakers may be concerned about the ability of both the military and other federal agencies to recruit and retain high-quality personnel and about equity between 

those two compensation systems. The best barometer of the effectiveness of any compensation package may be how well the employer attracts and retains high-quality 

personnel. However, the relationship between specific changes in pay rates and benefits and the effect on recruiting and retention is not clear, and changes in hiring and 

retention may be too gradual or too ambiguous to guide all decisions about compensation. A variety of factors—including economic conditions—may significantly affect 

an employer’s ability to attract and retain personnel during a given period. Therefore, 

determining the appropriate compensation solely on the basis of recent patterns of 

hiring and retention is difficult at best. Because of those shortcomings, employers 

often try to peg the cash compensation of their employees to that of some external 

benchmark group. 

The Congressional Budget Office (CBO) was asked to compare federal civilian and 

military compensation. Total compensation can be divided into three components: 

cash compensation (including pay, cash allowances, and bonuses); noncash benefits 

(such as subsidized health insurance and child care); and deferred benefits (such as 

pensions and veterans’ benefits.) Because of the difficulties of estimating the relative 

size of noncash and deferred compensation, for this analysis CBO focused on cash 

compensation, addressing how salaries earned by federal civilian workers compare 

with cash compensation for military personnel. According to CBO’s analysis, median 

cash compensation for military personnel—including the tax-free cash allowances for 

food and housing—exceeds the salaries of most federal civilians of comparable educa-
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tion and work experience.1 In addition, according to prior studies, noncash and 

deferred benefits are also higher for military personnel than for federal civilian 

workers. 

That simple comparison is limited, however, because it cannot entirely account for 

differences in the mix of occupations between military personnel and civilians. It also 

cannot accurately quantify differences in the intangible elements of a job or a compensation package. For example, military personnel may be separated from their families for extended periods of time or work longer hours or in more hazardous conditions than civilians do. Incorporating those differences between federal civilian and 

military jobs is extremely difficult.

Cash Compensation

Cash compensation may include wages, salaries, allowances, bonuses, and other forms 

of cash. For civilian employees, that measure is relatively straightforward. In this analysis, federal cash compensation was measured as total salary, which includes overtime 

pay but does not include cash performance awards.2

Military cash compensation includes more elements. In this analysis, CBO relied on a 

measure of cash compensation called regular military compensation (RMC), which 

the Department of Defense (DoD) has used as a fundamental measure of military pay 

since at least 1962.3

 RMC consists of basic pay plus service members’ allowances for 

housing and food, as well as the tax advantage that arises because those allowances are

1. Researchers often use the median, instead of the more common mean, or average, when working 

with earnings data. If earnings are ranked from lowest to highest, the median (or 50th percentile) 

divides the distribution in half. Unlike the mean, the median is not influenced by extremely high 

or low values.

2. The Office of Personnel Management reports that, on average, cash performance awards are small, 

accounting for between 1.0 percent and 1.3 percent of total compensation. See “Use of Cash 

Awards Governmentwide Fiscal Years 2001–2007,” available at www.opm.gov/perform/

CashAwds2007/UseOfCashAwards.asp.

3. See Department of Defense, Report of the 9th Quadrennial Review of Military Compensation, vol. 1 

(March 2002), p. 29.
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not subject to federal income taxes.4 All active-duty personnel (including guard and 

reserve personnel serving on active duty) are entitled to receive RMC.5

RMC does not include various types of special pay, bonuses, and other allowances 

that service members may receive. Special and incentive pay is usually awarded for 

particular skills or for hazardous duty, including deployment and combat. Members 

may also earn bonuses when they reenlist for several more years, especially if they have 

occupational skills that are in short supply. There are more than 50 types of special 

pay and bonuses, but an individual member might receive only a few over the course 

of his or her career.6

 Because all of those types of compensation are either earned by 

relatively few specialists or are earned irregularly, they are not generally included in the 

RMC measure. 

Comparing Cash Compensation

The Department of Defense (DoD) provided data on RMC for all enlisted personnel 

and commissioned officers serving on active duty in 2010.7 The Office of Personnel 

Management (OPM) provided data on the cash compensation of almost all full-time 

male federal civilians in 2008.8 CBO inflated the amounts provided by OPM to 2010 

4. RMC does not include tax advantages that arise if pay and allowances are not taxed by individual 

state governments, nor does it include other tax benefits that service members may receive. For 

example, a soldier who reenlists while serving in a combat zone need not pay federal tax on any 

reenlistment bonus received. Veterans’ benefits are not taxable either. The magnitude of those tax 

advantages has not been estimated for this analysis.

5. Single enlisted members in their first few years of service may live in barracks and not receive a 

housing allowance. In earlier work, CBO estimated an imputed value for barracks housing, which 

was slightly higher than the housing allowance for junior personnel. Substituting that value for the 

allowance would increase the cash compensation for junior enlisted members, but the increase 

would be small. See Congressional Budget Office, Evaluating Military Compensation (June 2007), 

p. 13.

6. For example, in 2010, personnel earned $150 to $225 per month for performing hazardous jobs 

or serving in dangerous areas; relatively few people serve on hazardous duty for 12 consecutive 

months. The maximum enlistment bonuses ranged from $15,000 to $40,000, depending on the 

branch of military service. The maximum selective reenlistment bonuses ranged from $40,000 to 

$90,000; higher bonuses were possible for some members with special skills. Each military service 

decides whether to award the maximum bonus or a smaller amount or any bonus at all. Bonuses 

are generally paid in annual installments over the enlistment or reenlistment period. In total, the 

Department of Defense expected to pay about $6 billion in special pay and bonuses in 2010—

about 5 percent of DoD’s total spending on military compensation and benefits (not including 

accrual costs for health care and retirement benefits) of almost $120 billion for that year. 

7. CBO excluded warrant officers, who usually begin their service as enlisted personnel and become 

warrant officers later.

8. OPM provided data for 97 percent of the 1.9 million workers employed in most federal agencies. 

The data do not include the approximately 750,000 employees of the Postal Service or workers in 

the legislative and judicial branches of government. For more information on the OPM data, see 

Congressional Budget Office, Characteristics and Pay of Federal Civilian Employees (March 2007).
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dollars using the across-the-board increases provided to most civilian employees 

(totaling 5.9 percent for those two years), and matched the data for workers in the 

two systems who had similar educational background and years of work experience. 

CBO limited the comparison to civilian men because their pattern of employment 

more closely mirrors military service than does the pattern for civilian women.9

In examining military compensation, CBO distinguished between enlisted personnel 

and officers. Enlisted personnel are generally recruited straight from high school and 

represent about 85 percent of all military personnel, although about three-quarters of 

enlisted personnel receive some college credit during their service.10 Officers generally 

have completed a four-year college degree. 

CBO compared the cash compensation of active-duty enlisted personnel with that of 

federal civilians who had a high school degree and perhaps some college education 

(but not a four-year college degree) and comparable work experience. According to 

that analysis, the median RMC for enlisted personnel in 2010 exceeded cash compensation for most federal civilian employees with a high school degree and perhaps some 

college education (see Figure 1). For any given number of years of work experience, 

median cash compensation for enlisted personnel was at least as high as the 75th percentile of earnings for federal workers with comparable work experience.11 In other 

words, the typical enlisted person receives more cash compensation than three-quarters of comparable federal civilians. 

CBO also compared the cash compensation of military officers with that of 

more-educated federal civilians (those with a four-year college degree). The median 

RMC for commissioned officers with two years of experience or more exceeds the 

75th percentile of cash compensation of federal workers with four-year college degrees 

(see Figure 2).12 That disparity between officers’ and civilian employees’ cash compensation grows with increasing years of experience, and the disparity for officers exceeds 

the disparity for enlisted personnel.

9. In the civilian sector, women are more likely than men to take extended absences from paid 

employment during their adult lives, perhaps to care for young children or elderly relatives. Military personnel—whether males or females—are much less likely to leave active duty for several 

years and return later. Including women in the data for federal civilians would lower average salaries for that group.

10. Congressional Budget Office, Evaluating Military Compensation.

11. The 75th percentile separates the top 25 percent of earnings from the bottom 75 percent. CBO’s 

analysis indicates, for example, that the median compensation for enlisted personnel with 10 years 

of work experience was about $64,000; the 75th percentile of earnings for federal civilian employees was $58,000. The median compensation for such federal civilian employees was $48,000.

CBO has shown only the median for military compensation because RMC for a given number of 

years of service does not vary as much as the salaries of civilians do. Cash pay for military personnel is predominantly determined by their rank (for example, sergeant or colonel), and at any given 

tenure, almost all individuals fall within a few ranks.

12. Senior federal executives were included in the comparison with officers (although excluded from 

the comparison with enlisted personnel).
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Figure 1.

Annual Cash Compensation of Enlisted Personnel and 

Federal Civilian Employees with Comparable Education and 

Work Experience

(2010 dollars)

Source: Congressional Budget Office based on data from the Department of Defense and the Office 

of Personnel Management.

Notes: Military cash compensation includes basic pay plus the allowances for housing and food 

received by all active-duty personnel and the federal tax advantage that occurs because 

those allowances are not taxed. Military data are for active-duty personnel in 2010. Data on 

cash compensation for civilians include 2008 earnings for male full-time workers with a high 

school degree and perhaps some college education (but not a four-year college degree), by 

age, inflated to values in 2010 using the across-the-board increases that have been provided 

to most civilian employees. CBO estimated the years of experience for civilian personnel. 

Data include workers in the wage grade, general schedule, and related pay plans. 

Data on civilians exclude employees of the Postal Service; several smaller agencies, including intelligence and national security agencies; and the legislative and judicial branches of 

government.

If earnings are ranked from lowest to highest, 25 percent of cash compensation falls below 

the 25th percentile. Similarly, the median divides the distribution of cash compensation in 

half and represents the middle of the distribution. The 75th percentile separates the top 

25 percent of earnings from the bottom 75 percent.

1 2 3 4 6 8 10 12 14 16 18 20 22

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Median for

Enlisted Personnel

75th Percentile for

Federal Civilians

25th Percentile for

Federal Civilians

Years of Work Experience

Median for

Federal Civilians
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CBO

Figure 2.

Annual Cash Compensation of Commissioned Officers and 

Federal Civilian Employees with Comparable Education and 

Work Experience

(2010 dollars)

Source: Congressional Budget Office based on data from the Department of Defense and the Office 

of Personnel Management.

Notes: Military cash compensation includes basic pay plus the allowances for housing and food 

received by all active-duty personnel and the federal tax advantage that occurs because 

those allowances are not taxed. Military data are for active-duty personnel (excluding warrant officers) in 2010. Data on cash compensation for civilians include 2008 earnings for 

male full-time workers with a four-year college degree, by age, inflated to values in 2010 

using the across-the-board increases that have been provided to most civilian employees. 

CBO estimated the years of experience for civilian personnel. Data include workers in the 

executive schedule, general schedule, and related pay plans. 

Data on civilians exclude employees of the Postal Service; several smaller agencies, including intelligence and national security agencies; and the legislative and judicial branches of 

government.

If earnings are ranked from lowest to highest, 25 percent of cash compensation falls below 

the 25th percentile. Similarly, the median divides the distribution of cash compensation in 

half and represents the middle of the distribution. The 75th percentile separates the top 

25 percent of earnings from the bottom 75 percent.

1 2 3 4 6 8 10 12 14 16 18 20 22 24

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Median for

Officers

75th Percentile for

Federal Civilians

Median for

Federal Civilians

25th Percentile for

Federal Civilians

Years of Work Experience
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CBO

Noncash and Deferred Benefits

In both the armed forces and civilian jobs, noncash and deferred benefits can be sizable and can influence decisions about employment, including whether to enlist or 

reenlist in the military or whether to embark on or remain in a career in civil service. 

Noncash and deferred benefits are more challenging to measure than cash compensation, however, and different researchers take different approaches.

In earlier work on military pay, CBO estimated that the combination of noncash and 

deferred benefits is about equal to regular military compensation.13 DoD has reached 

the same conclusion.14 In other words, the value of noncash and deferred benefits 

adds 100 percent to cash compensation.

CBO estimates that about 40 percent of noncash and deferred benefits for the military consists of subsidized goods and services that can be used immediately—such as 

medical care, groceries, the use of recreational centers, and child care. The other 

60 percent is the accrued cost of retirement pensions and other benefits that service 

members receive after they leave active duty—including health care for retirees and 

veterans’ benefits. The military’s traditional use of noncash and deferred benefits 

reflects, in part, a belief that such benefits encourage service members to stay for an 

entire career and that they reduce the costs that military families incur in searching for 

new schools, stores, and housing as they move among installations. 

The noncash compensation of the government’s civilian employees is generally less 

generous than that of service members. All federal civilians can participate in federal 

health insurance and retirement plans, although they generally pay more for health 

insurance than military personnel do.15 Also, for people who stay for a full career, the 

military retirement system is more generous than the federal civilian system, in that 

military members can receive an annuity immediately upon retiring after serving 20 

years. Because most military members enter the service between the ages of 18 and 24, 

they may begin receiving their retirement annuities in their 40s. In addition, noncash 

benefits like subsidized housing and groceries are not available to most federal civilian 

workers. 

Sources vary on the size of noncash and deferred benefits for federal civilians, however. The Office of Management and Budget publishes cost factors to add to the cash 

pay of federal civilians in estimating the total costs of government performance.16

Those factors suggest that noncash and deferred benefits add about 55 percent to the 

value of cash pay, or about half as much as military personnel receive. Survey data collected by the Department of Commerce’s Bureau of Economic Analysis (BEA) in the 

13. Congressional Budget Office, Evaluating Military Compensation. 

14. See the Department of Defense, Report of the 10th Quadrennial Review of Military Compensation, 

vol. 2 (February 2008), p. xi.

15. Congressional Budget Office, Evaluating Military Compensation, p. 17.

16. Office of Management and Budget, Performance of Commercial Activities, OMB Circular A-76, 

Attachment C. 
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CBO

national income and product accounts suggest that noncash and deferred benefits add 

about 75 percent to the cash pay of military personnel and about 50 percent to the 

cash pay of federal civilians. Although BEA’s estimate of noncash and deferred benefits for military personnel is lower than CBO’s and DoD’s, it too suggests that such 

compensation provides a larger increase to military pay than to that of federal 

civilians.

Factors That Make Comparisons Difficult

Comparisons of military and federal civilian compensation have several important 

limitations. First, broad comparisons between two types of employees cannot control 

for the different mix of occupations. Federal civilian workers are more likely to work 

in white-collar jobs than are enlisted personnel, for example.

Second, intangible job characteristics such as working conditions can differ markedly 

between military and federal civilian jobs, even if their type of occupation is the same. 

For example, military personnel are generally expected to change locations every few 

years—in addition to deploying for specific operations—whereas most federal civilians can choose to remain in the same geographical area throughout their career. Military members may work in more hazardous conditions or longer hours (and are considered to be on duty at all times). Members of the armed forces are subject to military 

discipline and are unable to resign or change jobs at will. 

At the same time, military life includes features that people may find more attractive 

than comparable civilian government jobs. Some military personnel receive greater 

responsibility earlier in their career than civilians do. Group solidarity can be greater 

for military personnel than for civilians as well. Quantifying those intangible elements 

among military and federal civilians is extremely difficult. 

Third, pay comparisons may ignore the value of training and education that are provided on the job. The military services generally try to enlist capable young people 

with high school diplomas and then train them for military life and for their occupational specialty. Federal civilian agencies, by contrast, generally hire people who have 

already been trained, often at their own expense (although many agencies offer workrelated education assistance). In addition, federal agencies are more likely to hire civilians who have more experience. Adding in the value of government-provided training 

and education would generally make the noncash share of total military compensation even greater relative to that share of total civilian compensation.

Fourth, differences between military and civilian career patterns complicate pay comparisons. Because the military “promotes from within,” pay may need to be higher for 

new enlistees than for civilians of similar ages and education levels, as military departments try to compete for the best pool of applicants from which to select the best 

career personnel. Also, data on federal civilian pay include the earnings of people who 

are regularly promoted to higher levels of responsibility during their career as well as 

those who are not. In contrast, the military’s “up-or-out” promotion system means 

that only people who are most successful may reach the most senior levels.