Evaluating the Labor Market Performance of Veterans Using a Matched Comparison Group Design

Abstract

A key concern in estimating the effect of military service on civilian earnings is bias from unmeasured differences between military veterans and nonveterans. The effects of activeduty service are estimated using the 1986 and 1992 Reserve Components Surveys, which permit a matched comparison between reservists who are veterans and reservists without active-duty service. Because military entrance requirements are identical for the reserves and active duty, estimated treatment effects embody control for selection by the military and selection by workers for a form of military service. Results are presented for officers and enlisted personnel and by race and era of service. The average impact of active-duty service on civilian earnings is 3 percent among the reservist population, but this average reflects treatment effects of essentially zero for enlisted personnel and 10 percent for officers. Among white enlisted personnel, veteran effects are negative but small. Treatment effects for African-American veterans average about 5 percent. Vietnam-era white draftees are found to have suffered an approximate 5 percent wage penalty and volunteers little penalty, but estimates from the reservist sample are likely to understate negative effects from Vietnamera service.

Keywords: Veterans, Civilian Earnings, Matched Comparison Group

JEL Classification: J3, J4, C1