Effects of Military Service on Earnings and Education Revisited

Variation by Service Duration, Occupation, and Civilian Unemployment

by Paco Martorell, Trey Miller, Lindsay Daugherty, Mark Borgschulte

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Research Questions

  1. How does military service, particularly years of service and military occupational specialty, affect earnings?
  2. How does military service affect college enrollment and degree attainment?
  3. How do economic conditions at the time of separation from the military affect earnings?
  4. How does the U.S. Army Partnership for Youth Success affect earnings?

The overriding objective of U.S. military compensation policy is to attract and retain the force necessary to meet the nation's national security objectives. Whether and how military service affects earnings and an individual's likelihood of completing college (one determinant of future earnings) has implications for military policies related to compensation, recruiting, and retention. Estimating the effect of military service is complicated by the fact that veterans are likely to differ from nonveterans in ways that are correlated with subsequent economic outcomes but are not observable to the researcher. This report builds on earlier work to understand how military service affects earnings, especially how these effects differ by the number of years of service and their military occupational specialties while serving. The authors also sought to understand how external factors and policies affect these impacts. To do this, they examined how economic conditions in the civilian labor market when individuals exit active duty affect postservice earnings, and they studied the effect on earnings of an Army recruiting program, Partnership for Youth Success, designed to promote enlistment but with the potential to ease the financial transition from military to civilian life.

Key Findings

Some Aspects of Military Service Affect Earnings More Than Other Aspects Do

  • For all year-of-service values, there is a large return to being in the military. This premium falls sharply upon separation, but the estimated returns become positive again and trend upward with time.
  • For all occupational categories, military service is associated with sizable long-run earnings gains. Veterans who enter occupations in health care or communications or intelligence have larger gains than veterans who go into combat arms.
  • The degree to which skills are transferable to the civilian labor market varies by occupation.

Effects of Military Service on Education Do Not Appear Significant

  • Service members significantly delay college enrollment but are as likely as similar nonenlistees to enroll at some point.
  • There is very little difference in college-enrollment and degree-attainment patterns by military occupational specialty except in the health care field.

Economic Conditions at the Time of Separation Affect Earnings

  • Veterans substitute military income for civilian income when they separate in times of relatively high unemployment. However, men's total earnings decrease in response to high rates of unemployment at the end of their first contract, and these negative effects last up to seven years.

Partnership for Youth Success Does Not Affect Earnings, College Enrollment, or Degree Attainment

  • In the case of this program, providing individuals with a promise of an interview upon separation from the military was not sufficient to increase earnings.

Recommendations

  • Develop credentialing programs that veterans can use to signal to employers that they possess certain skills.
  • Conduct more research on the effect of recent changes to veterans' educational benefits and help veterans select and apply for colleges.
  • Examine the implementation of the Partnership for Youth Success program to determine whether and when it becomes ineffective, followed by revamping the program or conducting more research on the effectiveness of veterans' transition assistance programs.
  • Develop more programs to aid the transition from the military.
  • Examine how business-cycle fluctuations affect the demand for transition assistance services.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data Sources

  • Chapter Three

    Analysis of the Effect of Military Service on Earnings

  • Chapter Four

    Analysis of the Effect of Military Service on Education

  • Chapter Five

    Analysis of the Effect of Economic Conditions at the Time of Separation

  • Chapter Six

    Analysis of the Effect of the Army Partnership for Youth Success Program

  • Chapter Seven

    Summary and Conclusions

  • Appendix

    Supplemental Tables

This research was sponsored by the Office of Accession Policy within the Office of the Under Secretary of Defense for Personnel and Readiness and was conducted within the Forces and Resources Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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