The issue with making salaries competitive with the market is that in order to attract the best and brightest, you do need to give them some competitive compensation, otherwise, as soon as you spend $50000 training an electronics technician, or ~2 million training a pilot, you will lose that investment when they are enticed to leave service by a significantly better salary offer in the civilian sector. Those that remain are either the most patriotic who do the jobs for love of it, or those who don't have the skills/aptitude to do anything else. That makes for a poor work environment as it is depressing for those who want to be there, and those who don't really want to be there have little motivation to do a good job anyway.
I must add, in my experience most servicemen love their jobs and are willing to be below market salary, as long as they feel they are not being abused or taken for granted, and as long as their families are not living at substandard or poverty level.