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During recent years, the Congress has expressed much concern about enlisted recruitment and retention in the active-duty military. Its concern has focused on the insufficient numbers of experienced personnel staying in the services, particularly the Navy, and on the insufficient quality of recruits joining the services, particularly the Army. To a great extent, these difficulties arose from restraints that were placed on the growth of military pay in 1979 and 1980.

In response to these concerns, the Congress has raised military pay and allowances by roughly 30 percent over the last two years. These increases, combined with the economic slowdown and other factors, have raised dramatically the levels of enlisted quality and experience in the active-duty military force. As evidence, the proportion of male recruits holding high school diplomas--a commonly used measure of quality--climbed from 65 percent in fiscal year 1980 to 79 percent in 1981, and could reach 85 percent in 1982. The number of enlisted personnel with more than four years of active-duty service--a common measure of career retention--rose between 1980 and 1981 by about 36,000, and could increase by roughly 35,000 more in 1982. Meantime, each service met its numerical requirements for manpower in 1981, and should meet them as well in 1982.

As the Congress debates the Department of Defense's budget for fiscal year 1983, it will again address the annual raise for military pay and allowances. The Administration recommended in February an across-the-board military raise of 8 percent, which would take effect in October 1982, to keep pace with anticipated growth in civilian pay.¹ More recently, however, Congressional interest has centered on the budgetary savings from alternative courses. The Congress might choose instead to give a smaller across-the-board percentage raise, or a raise restricted to more experienced personnel, or no pay raise at all.

In view of past concerns, the Congress may wish to consider what effects any given course taken in October may have on recruitment and retention, as well as on costs, over the next few years. With a few exceptions, the services have little difficulty recruiting and retaining officers. The outlook for enlisted military manpower, however, remains problematic. For one thing, the Air Force and especially the Navy plan to increase their strengths substantially (in the Navy's case, to man the "600-ship" fleet), which will add to their requirements for recruits and experienced personnel. At the same time, recruitment will be restrained by declining numbers of youths, falling rates of unemployment, and the current law that limits the percentage of recruits who score in the lowest acceptable category on the military's entrance examination (Category IV of the Armed Forces Qualification Test) to no more than 20 percent in each service. Moreover, the Congress is likely to extend into later years the requirement, imposed in 1982, that at least 65 percent of the Army's male recruits without prior military service be high school diploma graduates.

This report explores the effects on enlisted recruitment and retention, as well as on budgetary outlays, of three alternatives to the Administration's proposed 8 percent pay raise for 1983:

• A pay raise of 4 percent for all pay grades, which the House Budget Committee and other groups have proposed;
  
  
• A pay raise of 8 percent for senior pay grades E-5 to E-9, and no raise at all for pay grades E-l to E-4, which follows the general pattern of last year's "targeted" increase and illustrates another possible course² and
  
  
• No pay raise at all, which has been discussed in some budgetary debates.

The estimates in this report assume no catch-up pay raises beyond 1983, though pay raises after 1983 are assumed to keep pace with civilian wage increases. Also, the estimates assume that today's policies regarding enlistment and reenlistment standards remain in effect over the period.³ Finally, the estimates assume gradual improvement in the national economy--meaning decreases in the rate of civilian unemployment from 8.9 percent in calendar year 1982 to 6.7 percent by 1987.⁴

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1. Appendix A briefly discusses the way in which the annual military pay raise is determined.

2. This alternative follows the pattern established by the October 1981 raise. Although that increase averaged out to 14.3 percent, the Congress gave above-average raises to pay grades E-5 to E-9 and below-average raises to pay grades E-l to E-4. This restricted alternative would also deny October raises to officers in pay grades 0-1 and 0-2.

3. This assumption disregards recent Army policies raising reenlistment standards, which could limit the growth of the career force (the sum of those with more than four years of service). CBO used this assumption, though, to compare the effects of alternative pay raises apart from changes in personnel policies (the effects of which are more difficult to project). Moreover, the Army could well change the planned policies by or after 1983.

4. These unemployment rates come from CBO's latest baseline economic assumptions. The forecast is subject to an unusual degree of uncertainty about the rate of economic recovery.