Wage and Income in the Norwegian Armed Forces

The personnel is the most important resource in the Armed Forces. Every year, 45 percent of the operating budget in the Norwegian Armed Forces (NAF) is allocated to recruitment, retention, motivation, development, and separation of the human resources. The organization’s wage and incentive system structures how the personnel budget is distributed among the employees. However, NAF’s tasks, the personnel structure, and the civilian labor market change over time in line with the security situation, demographic development, and business cycles. Such changes may trigger a need for adjustments to NAF’s wage and incentive system to ensure “the right competence at the right time”. The starting point for a potential incentive system reform is a firm understanding of the current situation, where the outcome of existing incentives for a breadth of personnel appears. In this report, we show how the wage and incentive system in NAF influences the personnel’s wages and earnings. We are studying both the level and the distribution of wages and earnings. Furthermore, we uncover wage and earnings differences between comparable groups of personnel, across e.g. branches, departments, and gender. The analysis takes into account that the age and rank structure, gender composition, type of service, and number of working hours vary strongly across different branches and departments. We find that that age, work effort measured in hours, and activity based allowances are important drivers behind the gross earnings level. The median gross earnings for officers in 2020 was NOK 860 000, while for other ranks and civilians it was NOK 645 000 and 635 000, respectively. The median work effort behind these income numbers is 1.16, 1.23, and 1.00 work years. The spread in income is large. Among military personnel, 25 percent earn more than NOK 930 000, while at the same time 25 percent earn less than NOK 610 000. Much of the spread is due to incentives that are designed to target subgroups of the personnel. The Navy has the highest work effort and share of personnel in operational positions. This implies that the earnings in the Navy far outcompetes the earnings in other branches and departments. When we control for a host of control variables (including work effort), we find that the gross earnings among officers in the Navy to be 7 percent lower than officers in the Army (the reference group). Military personnel in the Air Force have the highest gross earnings on average, 10 percent higher than in the reference group. We find that officers in operational service is paid seven percent higher gross earnings after taking into account variations in work effort, while other ranks in operational service have a gross earnings that supersede other ranks in other service with two percent. NAF’s compensation policy stipulates equal pay between genders. We find that women in military positions work 3–5 percent less hours than comparable men. They have a 33 percent lower probability to serve in operational positions. Women in military service have around three percent lower gross earnings than what comparable men in military service have. Among civilians, the gender difference is around six percent. Among officers, there is no gender difference in base wage, but we find a two percent gender difference among other ranks.