Why troops in combat jobs should get higher danger pay than others

New directives for navy compensation and particular pays are set to be launched in January 2025 as a part of the Quadrennial Overview of Army Compensation, or QRMC.

As a element of the overview, the Pentagon is contemplating adjusting the best way Hostile Hearth and Imminent Hazard pay is allotted throughout the armed forces.

This overview raises the extra elementary subject of whether or not navy personnel are being adequately compensated for the fatality threat they assume in fight zones. If not, how ought to the Pentagon alter compensation to extra precisely replicate these dangers?

The present coverage supplies a uniform hazard pay premium of $225 per thirty days to navy personnel deployed into areas designated as a fight zone. This fee has been the identical since 2003 as a result of it isn’t listed to inflation.

Along with hazard pay, troopers are entitled to a particular tax profit often called the Fight Zone Tax Exclusion, or CZTE. This profit exempts navy personnel from paying earnings tax on any earnings earned whereas in a fight zone.

Notably, earlier analysis has proven the CZTE prices the U.S. authorities roughly 4.5 occasions greater than common hazard pay. As a result of the present hazard pay system is tied extra to the individual’s earnings than the extent of threat publicity, the main beneficiaries of the present system are high-ranking officers, who reap the preponderance of the tax advantages.

However high-ranking officers don’t bear a disproportionate share of threat. The information signifies enlisted personnel have increased fatality charges compared to officers.

For reference, all through the conflicts in Afghanistan and Iraq from 2001 to 2021, enlisted personnel, who characterize 82% of the entire lively responsibility drive, accounted for 90% of all fatalities.

And the distribution of fatalities turns into much more skewed on the decrease ranks. For instance, the ranks of E-5 — equal to sergeant — and beneath account for 72% of the fatalities whereas representing 59% of the entire drive.

The primary takeaway from the information is that fatality dangers are a lot increased for junior personnel in comparison with high-ranking officers, who safe the lion’s share of economic advantages beneath present compensation coverage.

That is in direct distinction to steerage offered within the economics literature and authorities practices, which point out that valuations needs to be primarily based on the extent of the danger, not the individual’s earnings.

There are additionally widespread variations in fatality dangers throughout job varieties. Earlier analysis has proven the common fatality fee for all navy personnel will increase by 45 per 100,000 when they’re deployed into fight zones compared to stateside personnel. For reference, the yearly fatality fee for typical employees within the U.S. is round 3 per 100,000.

This quantity will increase dramatically, nonetheless, for sure high-risk jobs, similar to infantry and particular forces operators — generally grouped collectively and often called “fight” job specialties. In comparison with stateside troops, navy personnel in fight jobs improve their fatality fee by 181 per 100,000 when deployed into fight zones.

Most troops, due to this fact, see a rise in a chance of demise, although there are main variations relying upon navy occupational specialties.

These distinctly completely different outcomes ought to immediate us to compensate navy personnel accordingly. Calculating the suitable compensation ranges will be addressed by using estimates from the worth of a statistical life, or VSL, literature.

The fundamental idea of the VSL is grounded in the concept people typically make on daily basis tradeoffs between wealth or earnings and fatality dangers. For instance, persons are typically keen to pay extra for safer automobiles or increased high quality medical care. Likewise, employees typically demand increased salaries in riskier professions, ceteris paribus.

Probably the most up-to-date estimates point out a median American is keen to pay roughly $130 for each 1 per 100,000 reductions in fatality threat. Dividing the willingness-to-pay estimate by the discount in fatality threat results in an approximate worth of $13 million per statistical life. That is the worth that economists use in benefit-cost analyses for presidency applications meant to avoid wasting lives or compensate fatality threat ranges.

Within the case of navy personnel, analysts can mix the elevated fatality threat ranges for deployment into fight zones with customary VSL estimates to extra exactly set acceptable hazard pay charges.

Utilizing this technique, the newest estimates recommend the common navy hazard pay needs to be $1,056 per thirty days (in 2024 {dollars}). For fight job varieties with increased fatality threat, this quantity balloons to $4,245 per thirty days.

We now have a number of coverage suggestions for extra precisely adjusting the present hazard pay system. First, we must always get rid of the CZTE and reallocate these price financial savings to various pay strategies. The first purpose is that the CZTE isn’t immediately associated to fatality threat, however fairly correlates with increased ranks or earnings for navy personnel.

Subsequent, we advocate reallocating CZTE funds to extend the present hazard pay of $225 per thirty days to $1,056 per thirty days for all navy personnel. This quantity needs to be tax exempt and listed to inflation.

Lastly, we advocate offering a brand new “excessive” hazard pay class to navy personnel who serve in high-risk occupations. The intense hazard pay class needs to be allotted primarily to infantry troopers and particular forces operators and set at $4,245 per thirty days.

We notice these suggestions and changes to hazard pay don’t come with out tradeoffs. The reallocation of funds would imply high-ranking officers in decrease threat job varieties would primarily be taking a pay reduce when in comparison with the present compensation system.

In distinction, low-ranking enlisted personnel in high-risk job varieties would obtain a pay improve. We imagine this adjustment is justified primarily based upon the fatality dangers seen in the newest conflicts and the varieties of personnel taking up these dangers.

Given new pay directives within the QRMC are set to be launched early subsequent yr, the time to behave is now.

The views expressed listed below are these of the authors and don’t replicate the official coverage or place of the Division of Protection, the U.S. authorities or some other establishment with which the authors are affiliated.

Thomas J. Kniesner acquired a PhD diploma in economics from The Ohio State College. He’s a analysis fellow at IZA and Krisher Professor of Economics Emeritus at Syracuse College, the place he served as chair of the Division of Economics. In 2013 Kniesner joined the school of Claremont Graduate College, the place he has been college professor, senior analysis fellow, and chair of the Division of Financial Sciences.

Ryan Sullivan acquired a PhD in Economics from Syracuse College. He’s an affiliate professor on the Naval Postgraduate Faculty, the place he has taught a wide range of subjects associated to cost-benefit and cost-effectiveness evaluation, marginal reasoning, budgeting, finance, and labor economics. He served as a soldier within the U.S. Military Nationwide Guard from 1998 to 2006.

W. Kip Viscusi is Vanderbilt’s first college distinguished professor, with tenured appointments within the Division of Economics, the Owen Graduate Faculty of Administration and the Legislation Faculty. Viscusi was beforehand the Cogan Professor of Legislation and Economics and director of the Program on Empirical Research at Harvard Legislation Faculty. He has additionally been the Allen Professor of Economics at Duke College and professor of economics at Northwestern College.