Supply and Demand. If you took one thing away from your high school economics class, I hope that it’s the basic understanding of supply and demand and applying it to your job search. At its core, high-paying jobs exist because the demand for that position is high and the supply of qualified applicants is low. On the flip side, low-paying jobs exist because the demand is low while the supply of people who can perform that job is high. There are obviously a lot of in-between cases, but, in its simplest form, it should help you frame your salary expectations in your job search.
The military is a place where supply and demand does not exist. Sure there may be some bonuses for certain specialties, but the baseline for pay relies on two things: paygrade and time in service. Think about that. Your performance doesn’t have any bearing on your military pay. If you’re in a scarce specialty you may receive a few hundred bucks a month extra in something like submarine pay or some cash tossed your way at the end of your initial contract, but your base pay is based on your rank and seniority. Your Basic Allowance for Housing (BAH) is based on your paygrade. This means the top performing O-3 and the bottom dwelling O-3 in the same MOS make the same amount of money. Crazy.
You might be thinking “Thanks, Captain Obvious!” but we all know the military is a little socialistic when it comes to its pay. This environment, however, hurts the service member when he or she is leaving the service and needs to understand the concept of market value. The most common rationale I encounter is when someone enters their rank and time in service into the Stay Navy calculator and says “Well, based on my base pay, tax advantage from BAS and BAH, TriCare, commissary privileges and the free on-base gym, I should be making $XX a year!” There are three fundamental flaws with this thinking.
- If staying in the military isn’t a viable option, neither is your current salary
This is a tough paradigm to break away from simply because it’s human nature to take into account your current pay rate when you are seeking a new job with higher pay. The issue is that if you’re getting out of the military, you can’t use your current salary as a hard benchmark. Think of it this way: if you applied to two jobs and got an offer from one but not the other, you can’t leverage what the non-offering company is paying their employees in negotiations; therefore, trying to use something that isn’t an option to set expectations can skew the transitioning member’s view of the current job market.
- The military market may be overpriced compared to the civilian market
Using myself as an example, when I decided to leave the Navy and go to business school, I picked up my O-4 on the way out the door which inflated my self-worth. I understood, however, that since I was looking to pivot my career to an industry in which I had no experience (marketing), my 10+ years in the Navy wouldn’t have much bearing on my future pay. I realized that I’d probably be looking at a pay cut since a lot of veterans (as well as civilians) entering business school often do so with 4-6 years of experience and, once we obtained our MBAs, we’d all receive similar job offers regardless of prior experience.
My situation is unique – what is more common is the junior officer who picks up an O-3 a year before separating. That’s a hefty pay bump that’s basically given for tenureship. I used to joke that the Navy had a great retention tool called LT pay. You’re getting that pay to entice you to stay, not to increase your market value on the outside. Need further evidence? Ever wonder why the military pay scale awards raises for every two years of service, but O-2s get a raise of over $600/month at the 3-year point? Of course not! Who’s going to question more money? But it’s there to make the salary more competitive and to have those officers on a 4-year contract think twice about getting out.
This happens in the civilian world too. A perfect example is when I was hired by DISH The offer was competitive because DISH understood that they were competing nationally with other companies that hire top 20 MBAs (also a good spot to point out they were not competing against my O-4 pay). However, when I was testing the market for marketing professionals in the Denver metro area a couple of years in, I found that I was overpriced at DISH since the Denver market is very different (read: lower) than the national top 20 MBA market.
The key takeaway for both of these situations is to understand the market you’re entering instead of getting hung up on the market you’re leaving.
- Cost of living adjustments don’t exist (as much) in the civilian world
BAH is awesome. There’s no way around it. When I was in a dump called Ridgecrest, CA my BAH was $976. When I moved to Port Hueneme, CA, my BAH was $1898. This type of equalizer doesn’t exist in the civilian world. Sure a company in San Francisco may pay more than a company in San Antonio, but that difference is nominal when you consider the disparity in the cost of living in those two places. The market for skillsets often doesn’t adjust for location pay. A national company that employs field service engineers usually pays the same hourly rate for someone based out of Dallas, TX that it does for someone in Los Angeles, CA. It’s not fair, but it’s often the reality.
Should You Expect A Pay Cut After Transitioning To Your Civilian Job? Not Necessarily
I’m not trying to tell everyone you should expect to take a pay cut when you leave the service. I’m saying that you need to understand how the civilian job market is independent of the military market and your military pay. Your pay in the military is not correlated to what you want to do in the civilian sector from a function and industry standpoint. Some fields will pay higher, some will pay on the lower end. I also want to caution against self-reporting resources such as Glassdoor, whose ratings may be high because either the people entering their salary are those on the higher pay scale or the reporting base isn’t large enough to paint an accurate picture. It’s also good not to take anecdotal evidence as the truth. In the internet age, there’s always going to be the person who posts “I left the military and now I make six figures!” That availability bias manifests itself because there are far less people announcing modest salaries and pay cuts. Do some real research to understand what certain industries pay to understand what you can expect in that job market – it’s a much more accurate picture than using your current military pay.
If your goal is to make more money than you did in the military when you transition, you need to be qualified for a position where the supply is low relative to the demand.