The Military Could Soon Face a Flag Officer Talent Crisis

Military service members received a heralded 3% pay increase under the 2021 National Defense Authorization Act, but this increase camouflaged the continued stagnation in general and flag officer pay stemming from provisions in the 2015 NDAA six years prior. That law limits the pay of generals and admirals (officers in pay grades O7 and above) to the Executive Level II salary level for civilians.  

This pay cap limits current and retirement pay of senior executives to $199,300. While that may sound like an impressive amount of money, these are executive leaders responsible for organizations larger than any of the companies whose chief executives earn, on average, $21.3 million. As a result of the cap, officers stop receiving pay raises at the two star rank. It’s a limit that discourages continued service and makes it harder to keep talent at the highest levels of the military.  

As of February, chief operating officer annual salaries in the United States averaged $447,971. That’s more than twice as much as the chairman of the Joint Chiefs of Staff earns. If the U.S. Army were a corporation, with its over 1 million active duty and reserve soldiers and 300,000 civilian employees, it would rank just behind Walmart in the size of its workforce. The compensation package for the chief operating officer of Walmart is almost $10 million, whereas, the Army Chief of Staff earns $199,300. For the three- and four-star officers who remain in the Army for 40 years, the cap creates a cumulative pay reduction of more than $1 million in earnings when compared to pay without the limitation.  

In the corporate world, that would be like promoting a middle manager to COO or CEO and then requiring them to serve for a decade without a pay increase for the privilege of taking on substantial new responsibilities.

The military develops its most senior officers from a limited pool of men and women who have typically served at least 26 years before making their first star as a general or admiral. By the time they are on their way to achieving a third star (and thus limited by the pay cap), they typically have at least 30 years of service. Most of them also have to pack up and move every one or two years for a new assignment. 

At this point, most face a decision: to continue to wear the uniform at the same pay or leave the military and possibly earn a significantly higher salary in the corporate world. 

Under the cap, these officers also are denied the standard 2.5% retirement increase for years served, so retirement benefits do not increase with continued service. While senior military leaders are largely driven by an ethos of service, at some point, the prospect of more time with their families and the decreasing potential earnings have to tip the scales towards retirement. For senior leaders in their 50’s, there is a point of diminishing returns on earnings in the corporate talent market.

As in the business world, talent management is a top priority for the military. Two years ago, the Army reinvigorated a Talent Management Task Force and all the services have programs that focus on attracting and retaining the best talent to defend the nation. But because of limitations imposed by Congress, the system is discouraging quality at the highest levels. 

Most people in uniform stay for service rather than money, but there comes a time in every career when the opportunity costs shift. While few would feel sorry for flag officers—they are, after all, the highest paid members of the military—the current system is not sustainable if we want the best officers to remain in uniform. 

At a minimum, Congress should delink the pay cap for retirement pay. This would provide a retirement equivalent to the pay scale for all service members, while not paying them more than members of Congress. Additionally, military pay caps should be adjusted based on the annual increase in the Employment Cost Index.  

Another possible solution with historical precedent would be to selectively remove the cap for certain positions based on the level of responsibility, such as the chairman of the Joint Chiefs, the service chiefs, and the combatant commanders. Finally, the military should adopt an innovative retirement system commensurate with the inherent risks, responsibilities and commitment of a senior military leader. 

It’s time for Congress and the Pentagon to begin serious consideration of how to address senior leader pay. Delinking military pay from the civilian Executive Schedule is an important start.  

Colonel Charles Luke is an Army Strategic Plans Officer, currently a fellow with the U.S. Army War College. The views expressed are those of the author and do not necessarily reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. Government.