"In the late 1990s, the military services were facing considerable recruiting and career retention problems. In responding, Congress was mindful of how inadequate pay had contributed to decreased recruit quality in the late 1970s. It authorized larger pay raises, increased special pays and bonuses, more recruiting resources, and repeal of planned military retired pay reductions for future retirees. In the midst of these efforts, the terrorist attacks of September 11, 2001, took place, providing a sense of national unity and military purpose. The 9/11 attacks and the programmatic changes noted above initially helped recruiting substantially in the early 2000s. However, the grueling pace of deployments to and from Iraq and Afghanistan, combined with the dangers of combat, have finally begun to cause long-anticipated recruiting problems. In 2005, the Army, Army National Guard, and Army Reserve all fell short of their recruiting goals. Career retention is difficult to measure, due to the suspended separation and retirement of many personnel since September 11, 2001, but so far retention has been more than satisfactory. […] 2006 and Proposed 2007 Military Pay Raises. President Bush's FY2006 budget, requested a 3.1% across-the-board military pay raise, effective January 1, 2006. The House version of the FY2006 National Defense Authorization Act (NDAA) includes the Administration request of 3.1%. The Senate accepted the House version in conference and it was subsequently enacted into the FY2006 NDAA [National Defense Authorization Act]. Based upon the September, 2004 to September, 2005 Employment Cost Index (ECI), a 2007 pay raise of 2.2% is anticipated without further congressional action."
CRS Issue Brief for Congress, IB10089