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What the Recruiter Never Told You

Part 5 -- Military Pay

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Continued from Part 4

First the good news: Military pay is not really all that bad. Now, the bad news: It also ain't all that great, either. What I mean by that is that for a brand new high school recruit, with little or not work experience, it would be hard to find a better starting wage. However, for an enlisted member with years of experience, trained in a critical technical specialty, it's not all that great when compared to wages for a similar civilian job.

After four months in the military, the brand new E-1 will be receiving about $29,959.80 per year in annual salary (Note: This figure includes the value of free housing, free food, and income-tax advantage). On the other hand, the E-6 with four kids, who has 10 years experience in the military will only be making about $54,952,86. If the person came into the military as a commissioned officer, an O-1 would be making an average starting salary of $45,969.67, and an O-4 with 10 years of experience would be taking home an average of $94,313.54.

Base Pay. Everyone gets base pay, and it's the same regardless of what military service you are in. It's based on an individual's rank, and the number of years you've been in the service. The past five years have been pretty good for military pay raises. Up until then, lagged about 13 percent behind comparable civilian pay. This gap however, has narrowed within the past few years (6.5 percent in FY 2005), and -- according to Congress and our President, will narrow even more in the coming years.

Using the Fiscal Year 2006 pay charts, an E-1 (the lowest enlisted grade), after four months of service makes $1273.50 every month for basic pay. If you have a two/four year college degree, or high school ROTC, or you enlist for six years instead of four (Air Force, only), it's possible to enlist in the military as an E-2, or even an E-3. The Army will give E-4 to someone who has a 4-year bachelor's degree. In these cases, the new recruit would be making $1427.40, $1501.20 and $1662.90 per month in basic pay, respectively. In some instances (Academy graduate/4-year degree with OTS/OCS, College ROTC Graduate), you can come in as a commissioned officer. A brand-new O-1 (The lowest officer rank) makes $2416.20 per month in basic pay (about twice as much as the brand-new E-1 enlisted member).

Regardless of what your Great Uncle Herbert, who served in W.W.II says, Basic Pay IS taxable (unless you are actively serving in a designated tax-free combat zone). You'll pay Federal Income Tax, Social Security, Medicare, and State Taxes on your basic pay. Some states do not tax military pay, while a few others won't tax it unless you are stationed within the state. The state in which you list with military finance as your "official residence" will determine the state tax rules you fall under.

Guard and Reserves. During basic training and job school, or any other time performing full-time duty (such as the two-weeks every year active duty training, or if mobilized), Guard and Reserve members receive the same pay as active duty members. During weekend drills, however, the pay scale is different. Guard/Reserve members receive four days worth of pay for each weekend drill. See Guard/Reserve Pay Chart.

Annual Pay Raises. Each year, Congress passes the Defense Appropriations Act and the Defense Authorization Act which contain pay raises for military personnel. For several years, military pay raises were below average pay raises for civilian jobs. This resulted in a "pay gap" between military and average civilian pay.

For the past few years, Congress has approved raises which exceed the average civilian pay increases (as measured by the Government's annual Employment Cost Index - ECI), which has somewhat closed the gap. Here are the "year-by-year" figures:

Annual Pay Raises

Year ECI Raise Pay Gap
1992 4.2% 4.2 -11.5
1993 3.7 3.7 -11.5
1994 2.7 2.2 -12.0
1995 3.1 2.6 -12.5
1996 2.9 2.4 -13.0
1997 2.8 3.0 -12.8
1998 3.3 2.8 -13.3
1999 3.6 3.6 -13.3
2000 4.3 6.2 -11.4
2001 3.2 4.1 -10.5
2002 4.1 6.9 -7.7
2003 3.6 4.8 -6.5
2004 3.2 4.1 -6.0
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