Here’s how the US military became the exception to America’s wage-stagnation problem

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Earlier this week, Brookings scholar Richard Reeves published an enlightening analysis of the Congressional Budget Office (CBO) data on income inequality.

His piece, “Restoring middle class incomes; redistribution won’t do,” described what frustrated Americans have felt for years: Since 1979, the wealthiest Americans experienced the most significant income gains. Counterintuitively, Reeves also highlighted that the lowest earners — the bottom quintile of household income — kept roughly on pace with the growth rates of the highest earners.

His analysis focuses on income stagnation and policy solutions for the Americans in the middle. While the top and bottom quintiles grew at 79% and 78% respectively, middle-class household income rose at a tepid 46%. Unlike the decades after World War II, when every income level increased at comparative rates, in recent years the middle class lagged woefully behind.

With one important exception. Over the last 18 years, active duty military pay increases significantly outpaced their civilian counterparts. A combination of economic forces and political obligations inverted the earning potential for uniformed personnel. With very little fanfare, military service became one of the last bastions of middle class social mobility.

An April 2018 demographic analysis by the Council on Foreign Relations indicated that the modern military draws heavily from middle-class families. Over 60% of 2016 enlistments came from neighborhoods with a median household income between $38,345 and $80,912.

The quintiles below and above that band were underrepresented, with the poorest quintile providing 19% of the force and the richest Americans enlisting at a rate of 17%. The modern force comes predominantly from the middle-class households highlighted in Reeves’ article.

Historically, those middle-class enlistees expected a comparatively low salary paired with exceptional benefits. This traditionally included a tax-free housing allowance and fully compensated medical care, but more recently incorporated full tuition coverage from the GI Bill. Over the last 20 years as civilian wages plateaued, military compensation for the post-9/11 force steadily increased.

A mid-grade enlisted sailor, soldier, or airman (at an E5 paygrade) made 10% less than the median American in 2000 and at the time (as John McCain pointed out) was eligible for food stamps. By 2011, service members of the same rank were making 10% more than the median American, even without including benefits.

The most recent jobs report indicated a national wage increase of 3.1%, slightly higher than the 2019 military pay raise of 2.6%. But for now, even excluding housing cost and medical insurance an “E5” is making an above-average American salary.

It’s not that the Pentagon was “keeping up with the Joneses.” It’s just that in the last 20 years, the Joneses weren’t keeping up with the military.

While the military is traditionally immune to the fluctuations and volatility of their private sector counterparts, the remarkable swing over the last decade was the result of two once-in-a-century events occurring in concert.

The economic recession began in 2008, around the same time as the so called “surge” in Iraq and the continuation …read more

Source:: Business Insider


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