Does military service still pay?

By Marilyn Lewis

Would you risk your life for a steady paycheck and a better future? That's a question many high-school graduates who are considering military service face.

Their grandparents endured the draft and the likelihood of a tour in World War II, Korea or Vietnam. Their parents weighed careers in an all-volunteer military; the Cold War still loomed large, but prolonged combat was rare. The payoff was training and benefits that lifted generations of families into the middle class.

Today, the toll in Iraq continues to make headlines, yet the want ads aren't exactly friendly, either: Even when the jobs are secure, the safety net of health insurance and retirement plans is not. Certainly, for some portion of the 1.4 million Americans currently on active duty, service is an economic decision as much as a patriotic one.

So the question persists: Does military service still pay?

On purely economic terms, the experts say yes. A high-school grad with few prospects and no way to pay for college can find unmatched benefits, marketable skills and bonuses for enlisting and then re-enlisting, even as much as $38,000 for later schooling.

"Military personnel in general make more than their civilian counterparts, except for the most senior of the senior," says Beth Asch, a military manpower expert at Rand.

"Now you could say, on the one hand, (civilians are) not getting sent off to Iraq to get shot at. But on the other hand they're not getting high-tech training which, once they leave, they can use in a civilian job."

Obviously, military life isn't for everyone. Your chances of success using today's military as an economic springboard depend on three things:

• What you want: Are you looking for a career? A way to pay for school? Skills can use as a civilian?
• What you bring to the table: How willing are you to risk your life? Do you have any particular skill the military needs?
• The deal you cut when signing up.

Back in the day

A tour of duty sure paid off in Grandpa's time. In World War II, 16 million Americans -- about 12% of the population -- put on a uniform. Around half those recruits used the GI Bill to get a college education, and when they got out of school, they swelled the American middle class.

"It's an incredible story," says Joe Davis, spokesman for the Veterans of Foreign Wars. "They became the scholars and the scientists and the captains of industry."For Vince Patton, who joined the Coast Guard in 1972, the service was the only clear path from inner-city Detroit to a middle-class life. He was one of 11 children in an African-American family of modest means and, like two brothers before him, he joined up mainly for the GI Bill. "I couldn't afford college," he recalls. "My grades weren't that great to get a scholarship. But I thought there would be a guaranteed job when I got out."

As it happened, he stayed in. When he retired at the young age of 47 in 2002, he held the Coast Guard's highest enlisted rank, earning $94,000 a year in pay and benefits. While in uniform, he earned a bachelor's degree (in social work), a master's (in counseling) and a doctorate (in education) -- all paid for by Uncle Sam. Now, he's got a $62,000 yearly pension and about $250,000 in retirement savings plus his job as director of community outreach for Military.com, an online news and community site for service people.

So, what's in it for you?

Since the military went volunteer in 1973, things have changed. The armed services are no longer a refuge of last resort for poor kids; most recruits are from middle-class families, and about 45% of military personnel have spent some time in college, says John T. Warner, an economist at Clemson University and expert on the economics of defense. Recruiters try to demand at least a high-school diploma and an entrance-exam score in the top 50%, though wartime waivers mean some recruits now are getting in with less. African Americans no longer bear a disproportionate burden in defending the country. In fact, the Department of Defense surveys find that more African American parents than others, skeptical of the war on terror, are steering their children away from the service.It's possible that you and Uncle Sam could strike a deal that works for you -- if you haven't got the money for college, if you've got no major crimes under your belt and if you don't expect to make CEO pay for a military career. Here are the five ways you can make money in the service.

Enlistment bonuses

Where military service can actually get lucrative is at enrollment time. The more trouble recruiters have making their quotas, the better your chances of squeezing big bucks out of Uncle Sam. These days, Army enlistment bonuses are running as high as $40,000. Re-up and you could be looking at an additional $60,000 bonus. You might even be able to get the service to pay off your student loans.

But you can't take the money and run. You've got to stick it out or pay it back, and at least 15% of new recruits bail, says Warner.

Notice, too, that not everybody is getting these big, fat bonuses. You have to sign up for what some -- not all -- consider the worst jobs. The tougher the job is to fill, the bigger the carrot your recruiter can dangle. Often, these jobs involve dangerous work in a war zone. You might be asked if you'd like to be an ordnance explosive technician, for instance.

Think long and hard about this one. "Our men and women in Iraq are primarily dying because of IEDs -- improvised explosive devices -- you know, roadside bombs," says Derek Stewart, director for military issues at the U.S. Government Accountability Office. It's the ordnance explosive technicians who find IEDs and defuse them. The Army's short on people willing to do this job, and only two-thirds of the spots are filled, he says.

Continued: Big bonuses for 'critical' assignments

The hardest-to-fill jobs, according to Stewart, are in the fields of psychological operations, military police, civil affairs and health care. If you choose to work in one of these areas, the chances are excellent you're headed to a combat zone.

A better option by far -- if you can wrangle it -- is to find a job that the military is paying a big bonus for, not because of the danger, but because the competition for expertise is so stiff from the private sector.

What you want is one of the assignments that's considered "critical," and that's about a fifth of the more than 600 jobs in all four branches of the service. Those -- many of which are in information technology, computer work, radar operations, surveillance and air-traffic control -- are where you'll earn big enlistment bonuses.

However, no specialty is safe from deployment any longer, and regardless of the specialty you choose, you could wind up reassigned. "You don't always have control over your assignment in the military," says Stewart.

The paycheck

The military is stingy with cash. Most recruits enter at one of the lower pay grades and make only around $1,200 to $1,400 a month ($14,400 to $16,800 a year). So, if you're talking strictly money in the pocket, soldiers, sailors and airmen can't keep up with civilians.

While beginning pay is low, raises come every year and with each promotion; there's a longevity raise every two years as well. Cost-of-living allowances take the sting out of posts in high-cost-of-living areas.

Studies show, Warner says, "that somebody who spends four to eight years in the military and then goes into the civilian sector, they don't take a loss. They earn as much as someone who did not go into the military."Someone who entered the military at 19 and served eight years typically will have reached the E-5 pay grade, with pay that ranges from $29,000 to $32,000 a year. That's comparable to the average pay of a civilian 27-year-old, according to Census Bureau data.

In-service benefits

The military pay advantage is in the benefits. When economists like Jim Hosek, another Rand economist and military labor expert, say that service members' pay is equal or better than civilians', they're including the noncash stuff like: free medical care (particularly valuable if you end up in a war zone); free housing (you'll love the barracks); free food (mess-hall cuisine is the stuff of legends); and other goodies like your uniform (you'll be a babe/guy magnet) and dirt-cheap life insurance (pray you'll never need it). For those who live off base, there are allowances for housing and food. (See details on pay and benefits at Military.com.)

These benefits are nice, but they're not as nice as money, says Derek Stewart, director for military issues at the U.S. Government Accountability Office.

Civilian jobs pay out about 67% in cash and the rest in benefits; the military pays just 49% in cash -- most of your compensation is in benefits. So, while you'll be grateful when you're 40 that you had the GI Bill while your colleague in the next cubicle is paying off a $30,000 student loan, while you're in active duty, you'll be out of luck if you want to, oh, pay the baby sitter or buy a house -- the kinds of things your civilian friends are doing.

The armed services may eventually be the last employer left to pay an old-fashioned retirement pension, the kind where you get a guaranteed monthly payment after retirement until you die. But you've got to stay in at least 20 years. Only 15% ever see that pension; most never see a dime and wind up years behind civilians their same age whose employers have been matching their retirement contributions in a 401(k).

Although service members can contribute to the Thrift Savings Plan, the government's version of a 401(k), participation is low.

"Their basic pay is so small that even that if they wanted to participate they just don't have a lot of disposable income to do that," Stewart says. The law allows it but so far none of the armed services makes employer contributions.

Special pay

Combat zones are where incentives begin to mount. There's "hostile fire" pay ($225 a month), family separation allowance ($250 a month) and special incentives for various categories of work. In addition, your earnings are tax-free while you're working in the war zone, and your basic needs are paid for.

Here's the question: What's your safety -- or your life, for that matter -- worth to you? It's not something most civilians ever have to ask themselves, but if you're signing up for military service, you're somehow making the calculations, whether or not you do the math out loud.

One piece of the answer appears in studies showing that service members are more likely to re-enlist if they've been in combat for a short while (but not a long time). "There is this sense that deployment is a bad thing, and maybe that's true outside the military. But the point is that people join the military, and once they're there, they like to be deployed," Asch says. "Otherwise why did they join the military?"

The GI Bill

One big reason is the GI Bill -- $38,000 to spend on college and 10 years to spend it. "The educational benefit is one of the top reasons why people join the military," says Davis, the VA spokesman.

So, if you are headed to college and you've no other way to pay for it, you're left asking yourself which is better (or worse): the risk of four years of service in wartime, or the risk of taking on about $38,000 in student loans that you could be paying off from your Social Security checks.

It's not an easy choice, says Davis. "As far as the wealth of experience, you are head and shoulders above your peers (by enlisting). As a potential employee, you know what the words 'now' and 'responsibility' mean, which makes you very, very valuable to an employer. But (when you get out) you are behind the power curve by four years -- you don't have the sheepskin."

Updated Nov. 18, 2008