or the other individual who is the follower the opportunity to respond effectively and efficiently to the military system.

Finally, let me touch on a couple of other areas, the military versus civilian mix and the so-called "civilianization" objective.

Civilians today account for a higher percent of our total manpower requirement than they did in the average 1964 to 1971 time frame. With our reductions in force having been largely accomplished by the end of fiscal 1973, we must press hard for better answers in this area, if for no other reason than the fact that the civilian employee costs less than the military member does, provided they can both produce the same result. Frankly, I do not know at this point how much further we should go in increasing the civilian portion of our total defense work force. There are, as you know, some jobs that have to be performed by military rather than civilian personnel simply to provide military people the opportunity for rotation from overseas tours and particularly from unaccompanied tours. There are other jobs that have to be performed by military members because their background is essential to the effective performance of the job. But certainly, this is an area that deserves a good deal of additional examination and better answers than we have been able to provide.

Utilization of women is another issue to which we expect to address increased attention. Actually, the mix of women in the Armed Forces has increased more than the mix of women in private industry. Total women in the forces today are about 42,000. 33,000 of them are nonmedical and that is an increase of 50 percent in the last 5 or 6 years. The projection of the services would increase that figure by a significant amount in the next few years.

Whatever the picture of male chauvinism, I am sure we will have to give that subject additional consideration.

Let me talk finally to some quality considerations because I know that you, Mr. Chairman, and other members of this committee are concerned that we not permit the erosion of quality as we move away from reliance on the draft.

Essentially, our quality objective in terms of people is twofold. First, we want to achieve a balance between the bright people and the mentally taxing jobs, and between those in the lower mental categories and the less difficult jobs. Our objective is not to get all bright people. Our objective is not to get people with all limited capabilities. Our objective is to get people whose abilities are commensurate with the jobs that have to be performed.

It was our judgment in the course of the last calendar year that the Army was being overburdened with people who were over their heads in terms of job assignments, and so we reduced, as the Army requested we should, the proportion of mental Category IV people who were being inducted or enlisted into the Army. We think that presently we have a force whose composition is roughly commensurate with the demands of jobs.

The second thing we seek to do in terms of quality is to select personnel under what I call the whole person concept. This takes into consideration not only how an individual does on a series of tests, because some people perform better than they test and some people. test better than they perform, but also takes into consideration the individual's school record, his personal attitude. his motivation and

his record as a citizen. Frankly, we would rather have a Category IV who has a clean police record, who has graduated from high school, who has done the most with his limited capabilities than we would a smarter individual who has represented nothing but trouble to society before he presents himself at the Armed Forces recruiting station.

Considerable emphasis has been placed, and more will be placed, on assigning the responsibility for people selection to the better members of the military organization who understand what it takes to be a good soldier, a good airman, sailor or marine, and who also have the capacity for recognizing these qualities in other people.

There are other areas that contribute to personnel costs and must be carefully managed to insure the effectiveness of the use of money. Certainly, among these are special pay. At the direction of the President, on January 25 I forwarded to you the report of the 1971 Quadrennial Review of Military Compensation which examined a number of areas of special pay including special pay for physicians, dentists, and veterinarians; flight pay; submariners pay; hostile fire pay; and enlisted attraction and retention pay, usually referred to as reenlistment and variable reenlistment bonuses.

I note for the record that there is an error on page 44. It indicates that we forwarded this report of the Quadrennial Review on January 25, 1971. It was forwarded on January 25, 1972.

Mr. Chairman, I appreciate the opportunity to speak as long as I have about not just the size and the composition of the force but about some of the cost elements which concern us as they do you and some of the manpower issues that are directly related to force cost and force efficiency.

As you noted, with me here today are general officer representatives of each of the four services. They and I work closely together in the development of our manpower plans and I think the interests of your committee would be well served if you would hear from them individually so that they could tell in the context of their services what I have attempted to tell you in the context of DOD overall.

MANPOWER COSTS

Mr. Chairman, in your letter to Secretary Laird in December 1971, you expressed concern over the fact that manpower costs increased sharply from FY 1968 to FY 1972 in spite of a reduction of over one million men. It is important that we examine that cost trend and the principal elements of manpower cost.

Payroll and related costs for all Defense manpower, including civilians, are shown in the following table:

TOTAL MANPOWER AND PAY AND RELATED COSTS (OUTLAYS)

Although the percentage of total outlays for manpower continues to rise in FY 1973, per capita manpower costs do so at a much more moderate rate. When we view manpower costs in terms of budget authority instead of outlays, we see a decline in the share of the Defense budget attributable to manpower.

The overall relationship since 1964 between budget authority and outlays is shown below.

Mr. KELLEY. During a period of buildup such as we had during 1964 to 1968, budget authority exceeds outlays. It does so because goods are ordered for future delivery, thus incurring budget authority obligations before the money is actually spent. Conversely, during a cutback, such as we had in 1968 to 1971, outlays exceed authority because deliveries continue even though we curtail new buying. In 1972, Congress approved an increase in authority over 1971, and we started to develop and acquire new weapons and to modernize forces in being. In 1973, we seek to continue at an accelerated rate to develop and procure new weapons as well as to modernize, and thus we are back to where budget authority exceeds outlays.

The decrease in manpower's share of budget authority in fiscal year 1973 reflects increases in future outlays for other purposes-not a de

crease in the level of spending for personnel. But we can anticipate that future years will bring greater stability in personnel costs rather than continued sharp increases.

Let me discuss each of the chief elements of manpower costs and the reasons they have increased in recent years.

ACTIVE DUTY PAY AND ALLOWANCES

Pay and allowances for active duty personnel account for over half of the total costs for manpower and about 30 percent of total outlays.

Mr. KELLEY. To understand why outlays rise while strength is decreasing, we must examine the impact of pay increases. These can best be illustrated by using rates of basic pay for specific grades as shown in the following table:

1 Includes the estimated military increase to match the estimated civilian comparability increase assumed for January 1, 1973. Administration or congressional initiatives in the area of pay could affect these rates.

* Regular Military Compensation (RMC) includes basic pay, quarters and subsistence allowances and tax advantage.

Mr. KELLEY. The total cost of pay increases effective in fiscal year 1972 and fiscal year 1973 is $4.81 billion, as follows:

ANNUALIZED DOD COST OF PAY INCREASES

Pay increase of:

November 14, 1971.
January 1, 1972..
January 1, 1973..

Total..

Annualized cost estimate $2,430,000,000 1, 220, 000, 000 1, 160, 000, 000

4,810, 000, 000

Mr. KELLEY. The sharp pay raises of recent years are due to three main factors:

1. The comparability pay (government with industry) principle for Federal civilian employees caused unusually large civil service pay raises during this period to catch up with industry.

2. In 1967, military pay was linked by law to the civilian General Schedule, thus providing increases in military pay corresponding to increase received by General Schedule employees.

3. Pay rates were disproportionately low for the lower military pay grades as the result of a policy followed during the years of heavy reliance on the draft. For 13 years before 1964, there were no pay increases at all in those grades. It was not only necessary to change this policy for the period under consideration to provide equitable pay for servicemen at the entry level; it also became necessary to add additional amounts to attract manpower for an AllVolunteer Force.

A great many longstanding bills became due during this period, and our payroll costs in fiscal year 1972 and fiscal year 1973 reflect a huge element of one-time catching up. The payroll trends also reflect the strong support by Congress of the need to pay equitably those citizens serving in the Armed Forces and to establish reasonably competitive military pay rates. The dual objective has been to remove the economic penalty levied on those who serve and to insure that the Armed Forces can compete successfully for the quality personnel needed to provide our national defense.

Looking ahead, it is reasonable to expect much more moderate rates of growth in pay costs. Reasonable pay competitiveness with the private sector has been achieved, and inequities affecting personnel in the lower military pay grades have been corrected. We have passed the point where active duty pay costs consume a constantly growing proportion of the Defense budget.

CIVILIAN PAY

Civilian pay is the next largest component of manpower costs, and it too has risen during a period of civilian force reduction.

CIVILIAN PAY (DIRECT HIRE) AND END YEAR STRENGTH

Mr. KELLEY. The Federal Pay Comparability Act of 1970 established a continuing system for adjusting salaries of Federal employees paid under statutory pay systems. This policy, adopted by Congress in 1962 for fixing Federal salary rates, and continued in this law, is based upon the principles that: (1) there should be equal pay for equal work, with pay differentials reflecting differences in work and performance; and (2) Federal pay rates should be comparable with private enterprise pay rates for the same kind of work.

Under the Coordinated Federal Wage System, rates of pay for Federal wage employees are established administratively on the basis of wage rates paid by private employers in each local wage area for similar work.

Increases for white-collar workers granted in January 1972 were limited by the 5.5 percent Pay Board guideline, and it is expected that Federal blue-collar rates will be similarly limited.