Will the Military See a Pay Raise in 2021?

On Feb. 10, the White House is expected to send its proposed 2021 budget to Congress. It should contain a recommended pay raise for military members, but the question on everyone's mind is "how much?"

If you think the president controls how much the military pay raise is, you may be surprised to find out that it doesn't quite work that way, despite how much people like or dislike any sitting chief executive. In fact, the law mandates an automatic pay raise no matter what the president or Congress says.

By law, the annual military pay raise is based on the Employment Cost Index (ECI), a number that measures how much the wages and salaries of private-sector employees change each year. Yes, the president does have the power to request a higher or lower raise from Congress; yes, Congress can vote a higher or lower raise than that proposed by the president or mandated by law. But historically that doesn't happen. The ECI for the 3rd quarter of the previous year is supposed to dictate the military pay raise.

In fact, going back 10 years, the annual military pay raise was almost always very similar to the ECI.

In 2018, the ECI was 2.9% and military members got a 3.1% pay raise for 2020. In 2017, the ECI was 2.4% and the military got a 2.6% raise in 2018. Going back 10 years, these numbers are pretty much within 1 or 2 tenths of a percentage point.

What does that mean for 2021? Well, the ECI for the third quarter of 2019, which ended Sept. 30, 2019, showed an increase of 3.0% over the previous year. That means you can assume that the military will probably get a 3.2% pay raise in 2021.

Before you get too caught up in the numbers, remember that a 3.0% pay raise means $91 more each month for an E-5 with 6 years of service, while a 3.2% raise would give them $97 more monthly.

Of course, there are lots of things that can change that legally mandated automatic pay raise.

Politics and retention are the two most important factors.

In case you haven't noticed, this is an election year. Anyone who has been on this Earth for a few years knows that no politician will pass up a vote that will make them look like they care for the military and their constituents. That means that big pay raises and special projects usually have no problem getting passed into law during an election year.

Other things to consider are recruiting and retention goals. Does the military need to offer people more money to join or stay in the military? Is the civilian economy strong? In 2019, all the branches met or exceeded both their recruiting and retention goals, so maybe the Pentagon will say it doesn't need a pay raise for members. The brass may want to use that money to pay for other things, such as weapons, housing or training.

Either way, once the official numbers come out, Military.com will have the proposed pay charts available for you to check out so you can plan how you will spend all that cash.

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