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The U.S. military received its largest pay raise since 2010 this year, and servicemen and women can expect another large bump in salalary in 2021, but how exactly are those increases determined?
Annual raises are typically determined by the Employment Cost Index, which measures increases in private-sector wages and salaries.
The Bureau of Labor Statistics calculates the Employment Cost Index and updates it every three months.
However, Congress or the president can opt to enact a different pay raise.
The president, for example, can choose to cap the increase, which is typically done through a budget request. Congress then has the power to either approve, or override the president’s authority to cut pay unilaterally. Increases were capped from 2014 through 2016.
On the other hand, in 2008 and 2009, Congress enacted raises that exceeded the ECI.
ECI differs from the Consumer Price Index, which is used to determine pay increases for retirees via cost of living adjustments. CPI is tied to inflation.
ECI does not necessarily determine federal civilian pay, either.
Despite concerns about the fiscal 2021 defense budget, the top Republican on the House Armed Services Committee expects the pending 3 percent increase for service members to remain intact. That follows a 3.1 percent pay bump in 2020.
The proposed defense budget for fiscal 2021 is $741 billion.