STATEMENT BY GENERAL JOHN A. WICKHAM. JR. CHIEF OF STAFF U.S. ARMY BEFORE THE SUBCOMMITTEE ON PERSONNEL AND COMPENSATION COMMITTEE ON ARMED SERVICES HOUSE OF REPRESENTATIVES 99TH CONGRESS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000700070009-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 27, 2016
• Document Release Date: July 11, 2013
• Sequence Number: 9
• Publication Date: April 2, 1985
• Content Type: MISC

Gt01
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RECORD VERSION
STATEMENT BY
GENERAL JOHN A. WICKHAM, JR.
CHIEF OF STAFF
U.S. ARMY
BE FORE THE
SUBCOMMITTEE , ON PERSONNEL AND COMPENSATION
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
99TH CONGRESS
2 APRIL 1985
NOT FOR PUBLICATION
UNTIL RELEASED BY THE
HOUSE ARMED SERVICES
COMMITTEE
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STATEMENT TO THE
PERSONNEL AND COMPENSATION SUBCOMMITTEE
OF THE HOUSE ARMED SERVICES COMMITTEE
BY GENERAL JQHN.A. WICKHAM, JR.
CHIEF OF STAFF, UNITED STATES ARMY
2 APRIL 1985
MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE. ALTHOUGH THE
MILITARY RETIREMENT SYSTEM HAS BEEN STUDIED TEN TIMES OVER THE
PAST 35 YEARS AND IT HAS BEEN A TOPIC OF PUBLIC DEBATE IN
RECENT YEARS, THE ARMY APPRECIATES THIS OPPORTUNITY TO PRESENT
ITS PERSPECTIVE AND INSIGHTS. I WILL CONFINE MY REMARKS TO THE
NONDISABILITY SUBSYSTEM.
AT THE OUTSET, IT IS IMPORTANT TO NOTE THAT THE CONGRESS IN
1973 MANDATED AN ARMED FORCES MANNED WITH VOLUNTEERS. THE
IMF3RTANT SECURITY MISSIONS ENTRUSTED TO OUR SERVICE PEOPLE AND
THE FIRST RATE EQUIPMENT.BOIG PUT IN THEIR HANDS REQUIRE A
FORCE OF HIGH QUALITY VOLUNTEERS. GIVEN THE RISKS AND DEMANDS
OF MILITARY LIFE, VOLUNTARY SERVICE BY QUALITY PEOPLE CAN BE
ACHIEVED ONLY WITH ADEQUATE TOTAL COMPENSATION. THE RETIREMENT
BENEFIT TRADITIONALLY HAS BEEN VIEWED AS A FORM OF DEFERRED
COMPENSATION. THE VALUE OF THE MILITARY RETIREMENT SYSTEM
ALREADY HAS BEEN REDUCED SIGNIFICANTLY OVER THE_PAST 5EYERAL
YEARS. THEREFORE, TO THE EXTENT THAT FURTHER MAJOR CHANGES ARE
MADE IN THE RETIREMENT BENEFITS, THE ARMED SERVICES,
PARTICULARLY THE ARMY, WHICH CONTINUES TO REQUIRE SPECIAL
INCENTIVES TO ASSURE QUALITY ENLISTMENTS, INEVITABLY WILL FIND
IT DIFFICULT TO MAINTAIN THE CURRENT QUALITY IN ENLISTMENT AND
REENLISTMENT, THEREBY JEOPARDIZING THE VOLUNTEER SYSTEM.
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THE RETIREMENT SYSTEM IS A FUNDAMENTAL COMPONENT OF TOTAL
COMPENSATION. AS SUCH, IT REPRESENTS PAYMENT FOR SERVICES
PROVIDED AND SERVES AS AN IMPORTANT FORCE MANAGEMENT TOOL BY
SHAPING PERSONNEL BEHAVIOR. IN THAT CAPACITY, IT SUPPORTS
NATIONAL SECURITY BY ENSURING THAT THE ARMY'S MANPOWER
OBJECTIVES ARE ATTAINABLE. THE CURRENT SYSTEM ACCOMPLISHES
THIS GOAL IN THREE WAYS: BY MAINTAINING YOUNG, VIGOROUS AND
MISSION-READY FORCES BY AFFECTING THE FORCE PROFILE; BY MAKING
THE CHOICE OF A MILITARY CAREER A REASONABLY COMPETITIVE
ALTERNATIVE; AND BY SUPPORTING MOBILIZATION. HENCE, ANY
ALTERNATIVE THAT MIGHT BE CONSIDERED MUST BE EVALUATED IN TERMS
OF ITS ABILITY TO ATTRACT AND RETAIN QUALITY PERSONNEL. THE
BENEFITS OF POTENTIAL SAVINGS FORECAST BY VARIOUS ALTERNATIVES
MUST BE WEIGHED AGAINST THE RISK THAT READINESS WILL BE
DIMINISHED THROUGH THE LOSS OF EXPERIENCED PERSONNEL AND THE
RELUCTANCE OF FIRST TERMERSiO BECOME CAREER SOLDIERS RESULTING
FROM A CHANGE IN THIS FUNDAMENTAL ELEMENT OF THEIR COMPENSATION
PACKAGE.
TO ILLUSTRATE THE POINT ABOUT HOW RETIREMENT BENEFITS HELP
SHAPE DECISIONS ABOUT REENLISTMENT, CONSIDER THAT FOR A FIRST
TERM SOLDIER IN HIS THIRD YEAR OF SERVICE, THESE BENEFITS
ACCOUNT FOR 33 PERCENT OF THE PRESENT VALUE OF HIS LIFETIME
EARNINGS, WERE THE SOLDIER TO CHOOSE A MILITARY CAREER. AT TEN
YEARS OF SERVICE, THIS PERCENTAGE RISES TO 37 PERCENT. THUS,
IT IS NOT SURPRISING THAT 13 PERCENT OF FIRST TERMERS AND MORE
THAN 32 PERCENT OF CAREERI,STS-14ST-THE RETIREMEN_SYSTEM AS THE
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SINGLE MOST IMPORTANT FACTOR IN THEIR REENLISTMENT DECISIONS.
THIS MAKES RETIREMENT THE MOST IMPQRTANT REENLISTMENT FACTOR
AMONG CAREERISTS AND THE THIRD MOST IMPORTANT FACTOR AMONG
.....
FIRST TERMERS. THEREFORE, IT FOLLOWS THAT REENLISTMENT
DECISIONS WILL BE AFFECTED BY A CHANGE IN THE SYSTEM;
ESPECIALLY A CHANGE THAT SIGNIFICANTLY REDUCES THE VALUE OF
FUTURE BENEFITS.
AS I TRAVEL AROUND THE ARMY AND TALK WITH OUR SOLDIERS,
LEADERS, AND FAMILY MEMBERS, THE RETIREMENT ISSUE IS THE ONE
MOST FREQUENTLY RAISED. THERE IS DEEP CONCERN IN T_HE ARMY _OYER
,TALK__OF_ROTENTIAL-C-1-1-41GES-IN_KTIREMENT. THIS CONCERN VOICES
DESPAIR OVER "BREAKING FAITH" OR RENEGING ON PROMISES MADE
---------------------------
ABOUT THE TOTAL COMPENSATION PACKAGE, AND APPREHENSION ABOUT
THE ARMY'S ABILITY TO ATTRACT AS WELL AS RETAIN QUALITY
VOLUNTEER SOLDIERS. INCIDENTALLY, "GRANDFATHERING" THE CURRENT
FORCE IS NO SOLUTION, IN'MY OPINION. SUCH AN ACTION WOULD
YIELD NO NEAR-TERM SAVINGS. MOREQUER, IT WOULD PR_ODUCFfOR
MANY YEARS TO COME, TWO CLASSES OF SOLDIERS IN THE ARMY, THOSE
WITH THE CURRENT RETIREMENT SYSTEM AND THOSE WITH AN INFERIOR
ONE. WE CAN HARDLY EXPECT THE MORE SENIOR SOLDIERS, ALTHOUGH
GRANDFATHERED, TO CITE CONTINUITY OF RETIREMENT BENEFITS AS A
MAJOR FACTOR IN URGING YOUNGER, HIGH QUALITY SOLDIERS TO MAKE A
CAREER OF THE ARMY. HAVING SEEN A "BREACH OF FAITH" ON THE
RETIREMENT SYSTEM, THESE SOLDIERS ARE LIKELY TO "VOTE WITH
THEIR FEET" BECAUSE THEY MAY SENSE THAT NO BENEFITS ARE SECURE.
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IT IS IMPORTANT TO RECOGNIZE HERE THAT BEHAVIOR NEED ONLY
BE AFFECTED MODESTLY FOR THE ARMY TO SUFFER SERIOUS DAMAGE.
FOR EXAMPLE, IF CONTINUATION RATES AMONG ARMY CAREERISTS FELL
ONLY 3 PERCENT, WE PREDICT THAT THE ARMY WOULD LOSE 35,000
CAREER NCO'S, AND ITS ANNUAL ACCESSION REQUIREMENTS WOULD
INCREASE FROM 145,000 TO 180,000 AT A TIME WHEN THE PRIME
RECRUITING MARKET IS SHRINKING. WE ESTIMATE THAT EVEN IF WE
LOWERED OUR ENLISTMENT STANDARDS TO THE CONGRESSIONAL FLOOR OF
NO MORE THAN 20 PERCENT AFQT CATEGORY IV, ARMY RECRUITING COSTS
WOULD RISE BY AT LEAST $72 MILLION DOLLARS. TO MAINTAIN THE
ARMY'S GOAL THAT BETWEEN 59 AND 63 PERCENT OF ITS ACCESSIONS BE
IN AFQT CATEGORY I-IIIA WOULD REQUIRE AN ADDITIONAL $1.1
BILLION DOLLARS IN RECRUITING RESOURCES.
IF THE MERITS OF A PROPOSED CHANGE TO THE RETIREMENT SYSTEM
ARE TO BE ANALYZED IN TERMS OF ITS IMPACT ON THE FORCE THEN
THAT IMPACT MUST BE PROJECTED. UNFORTUNATELY, THE RELIABILITY
OF PROJECTIONS IS SERIOUSLY AFFECTED BY THE FACT THAT NO
HISTORICAL DATA EXISTS ON WHICH THEY MAY BE BASED. INSTEAD OF
INFORMATION ON HOW SOLDIERS RESPONDED TO PAST CHANGES IN THEIR
RETIREMENT SYSTEM, EXTRAPOLATIONS MUST BE BASED ON THEIR
SENSITIVITY TO BONUSES AND PAY CAPS. THE PROBLEM HERE IS THAT
A BONUS CHANGE OR PAY CAP AMOUNTS TO LESS THAN A 1 PERCENT
CHANGE IN LIFETIME EARNINGS, THAT AMOUNT IS INSIGNIFICANT IN
COMPARISON TO THE EFFECT OF A SUBSTANTIAL REDUCTION IN THE
VALUE OF MILITARY RETIREMENT. THESE PROBLEMS ARE ESPECIALLY
SERIOUS IN LIGHT OF THE DRAMATIC EFFECT THAT SMALL CHANGES IN
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THE CONTINUATION RATES HAVE ON THE FORCE PROFILE. THUS, WHILE
PROJECTIONS ARE NECESSARY FOR MEANINGFUL DISCUSSION OF THESE
ISSUES, WE MUST RECOGNIZE THE GENERAL UNCERTAINTY SURROUNDING
SUCH FORECASTS AND THE HIGH COST OF BEING WRONG BY ONLY A SMALL
AMOUNT.
THE ARMY DOES NOT SUPPORT THE ADOPTION OF ANY OF THE
ALTERNATIVES PROPOSED BY THE 5TH QRMC BECAUSE OF THE
UNCERTAINTY REGARDING THEIR ULTIMATE EFFECT ON THE CAREER FORCE
AND THE SHRINKING PRIME RECRUTING MARKET. WHILE THE 5TH (AMC'S
ANALYSIS PREDICTED THAT THEIR PROPOSALS WOULD HAVE LITTLE
EFFECT ON RETENTION, SENSITIVITY ANALYSIS CONDUCTED BY THE ARMY
SHOWED THAT MODEST CHANGES IN SEVERAL OF THEIR ASSUMPTIONS
WOULD RESULT IN THE PREDICTION OF MUCH GREATER LOSSES TO THE
CAREER FORCE. ALSO, BECAUSE THEY WOULD NOT HAVE RESULTED IN
NEAR TERM REDUCTIONS IN OUTLAYS, ADOPTION OF ANY OF THEIR
PROPOSALS WOULD NOT CONTRIBUTE TO DEFICIT REDUCTION DURING THIS
DECADE. THEREFORE, THE ARMY CONSIDERED THE RISKS TO BE
UNACCEPTABLY LARGE AT A TIME OF TIGHTENING RECRUITING MARKETS
AND DETERIORATING PAY COMPARABILITY.
A RELATED ISSUE DEALS WITH THE 20-YEAR RETIREMENT OPTION.
CRITICS ARGUE THAT THIS OPTION IS OVERLY GENEROUS AND LEADS TO
LOSS OF EXPERIENCED PERSONNEL. IN FACT, THE AVERAGE NCO LEAVES
THE SERVICE WITH ABOUT 23 YEARS OF SERVICE AND ROUGHLY $10,000
IN RETIREMENT PAY, WHICH FOR A FAMILY OF FOUR IS AT THE POVERTY
LEVEL. READINESS OF THE ARMY, PARTICULARLY THE COMBATANT AND
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FIELD SUPPORT FORCES, DEPENDS ON HIGH QUALITY SOLDIERS AND
VIGOROUS, STRONG LEADERSHIP AT ALL LEVELS. AN ATTRACTIVE
20-YEAR RETIREMENT OPTION IS ABSOLUTELY ESSENTIAL TO
MAINTAINING ARMY READINESS BECAUSE SUCH AN OPTION PERMITS THE
LEADERSHIP TO REMAIN RELATIVELY YOUTHFUL, AND ALLOWS FOR
SEPARATION OF LEADERS NOT SELECTED FOR PROMOTION OR WHO HAVE
TIRED OF TOO MUCH FAMILY SEPARATION AND ARDUOUS SERVICE. THE
CONGRESS RECOGNIZED THE QUALITY OF LEADERSHIP ISSUE IN PASSAGE
OF DOPMA WHICH REQUIRES SEPARATION AT VARIOUS POINTS IN SERVICE
OF OFFICERS TWICE PASSED OVER FOR PROMOTION. THEREFORE, ANY
CHANGES WHICH WOULD MAKE THE 20-YEAR OPTION LESS ATTRACTIVE
COULD SERIOUSLY AFFECT THE QUALITY OF FORCE AND READINESS.
TURNING TO THE ISSUE OF THE GENEROSITY OF MILITARY
RETIREMENT, LET ME REITERATE THE POINTS MADE BY ASSISTANT
SECRETARY KORB IN HIS RECENT TESTIMONY BEFORE THE SENATE ARMED
SERVICES COMMITTEE. WHEN PROPERLY COMPARED, MILITARY
RETIREMENT IS BETWEEN 1.2 AND 1.5 TIMES MORE GENEROUS THAN THE
AVERAGE PRIVATE RETIREMENT SYSTEM. IT SIMPLY IS NOT SIX TIMES
MORE GENEROUS AS HAS BEEN ASSERTED BY THE GRACE COMMISSION.
FURTHERMORE, EVEN IF OT
teENSATION PACKAGE
WERE _COMPARABLE_IETJIEILCIV_ILIAN-C?0.U-NT-E-RRARTS, IT IS W-
UNREASONABLE NOR UNEXPECTED_THAT_RETIRMENT BE SOMEWHAT MORE
GENEROUS _TO.INDUCE INDIVIDUALS TO ACCEPT THE HARDSHIPS AND
HAZARDS EXPERIEMER DURINCI_A MILITARY CAREER. SOLDIERS ACCEPT
AN UNLIMITED LIABILITY CONTRACT WHEN THEY ENTER THE SERVICE.
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FREQUENT FAMILY SEPARATION, REPETITIVE OVERSEAS DUTY OFTEN IN
DANGEROUS LOCATIONS MUCH AS THE DMZ IN KOREA sOR_ALONG THE
BORDEN GERMANY, AND HAZARDS SUCH AS TOT_IRALICALLY?S4FFERED
BY MAJOR ARTHUR NICHOLSON IN EAST GERMANYL.QALLEGRJAIRNESS
WITH THE TOTAL MILITARY COMPENSATION PACKAGE.
IT IS ALSO IMPORTANT TO RECOGNIZE THAT THE MILITARY
RETIREMENT SYSTEM IS ESSENTIALLY A MATURE SYSTEM. WHILE THERE
HAS BEEN SUBSTANTIAL GROWTH IN COSTS IN RECENT YEARS, 55
PERCENT OF THAT INCREASE HAS BEEN DUE TO INFLATION. OF THE
REMAINDER, 19 PERCENT HAS BEEN CAUSED BY AN INCREASE IN THE
NUMBER OF RETIREES, 21 PERCENT HAS BEEN CAUSED BY INCREASES IN
BASIC PAY AND 5 PERCENT RESULTED FROM ADJUSTMENTS TO RETIRED
PAY. BECAUSE THE NUMBER.OF RETIREES HAS LARGELY STABILIZED,
FUTURE REAL GROWTH WILL AMOUNT TO ABOUT 1 PERCENT OF THE DOD
BUDGET AND SHOULD COMPRISE A:SHRINKING PERCENTAGE OF GNP.
THE COST OF THE CURRENT SYSTEM REFLECTS THE CUMULATIVE
EFFECT OF PAST DECISIONS TO MAINTAIN A STANDING ARMED FORCE
FOLLOWING WORLD WAR II AND KOREA. UNLESS WE ARE WILLING TO
BREAK OUR COMMITMENTS TO CURRENT RETIREES BY REDUCING THE VALUE
OF THEIR BENEFITS, THERE IS NO WAY TO REDUCE SIGNIFICANTLY
NEAR?TERM RETIREMENT COSTS. LIKE THE OTHER ITEMS IN THE ARMY
BUDGET, MILITARY RETIREMENT IS A COST OF NATIONAL DEFENSE.
WITH NATIONAL SECURITY, LIKE ANYTHING ELSE IN LIFE, YOU GET
WHAT YOU PAY FOR! IN MY VIEW, THERE IS NO WAY TO BUY ADEQUATE
NATIONAL SECURITY "ON THE CHEAP" IN EQUIPMENT OR IN PEOPLE
PROGRAMS
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IN SUMMARY, LET ME REPEAT SEVERAL POINTS: IT IS NOT
POSSIBLE TO AFFECT NEAR-TERM DEFICITS THROUGH THE REALIZATION
OF SIGNIFICANT IMMEDIATE SAVINGS IN RETIREMENT COSTS; THE
RETIREMENT SYSTEM WILL NOT EXPERIENCE RAPID FUTURE GROWTH;
SERIOUS PERSONNEL LOSSES CAN OCCUR FROM RELATIVELY SMALL
CHANGES IN CONTINUATION RATES; SUCH LOSSES OF EXPERIENCED
PERSONNEL INEVI
THF VOLUNTEER BASIS FOR MANNING THE ARMY. THEREFORE, I AM
OPPOSED TO CHANGES IN THE CURRENT RETIREMENT SYSTEM WHICH HAS
SUCCESSFULLY SUPPORTED MANPOWER POLICIES FOR OVER 35 YEARS.
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