Combat Injuries Affect Veterans in the Labor Market

Disability payments made to veterans injured during combat adequately compensate them for the earning losses they experience in the civilian job market, according to a new RAND Corporation study.

Because of disability compensation, the income of military service members who suffer serious or very serious injuries is on average about 36 percent higher four years following deployment than what would have been expected had they not been injured.

"Our findings indicate that the U.S. military is doing a good job on average of compensating injured veterans for earnings losses that result from combat injuries," said Amalia Miller, a study author and an economist with RAND, a nonprofit research organization.

RAND economist and co-author Paul Heaton added, "When you compare these numbers to civilian programs like workers' compensation, which aim to provide two-thirds gross wage replacement, but often fall short in practice, the military looks pretty favorable."

The RAND study was conducted as part of the 11th Quadrennial Review of Military Compensation, and examines how injuries sustained by active and reserve component service members affects their subsequent earnings and the extent to which retirement and disability payments from the Department of Defense, the Department of Veterans Affairs and the Social Security Administration compensate for earnings losses attributable to injury.

The RAND study looked at injuries, labor market earnings and disability compensation for nearly 700,000 active and reserve military members ending deployments to Iraq and Afghanistan between 2003 and 2006. These service members and their spouses were followed for as many as seven years after deployment. The analysis took into account the fact that the incidence of injury is likely to be correlated with such things as pay grade, military occupation or other service member characteristics.

After nearly a decade of fighting in Iraq and Afghanistan, the toll on U.S. service members has been high. Eighteen percent of deployed service members in the study sample returned home feeling that their health had worsened over the course of the deployment, and another 3 percent were wounded in combat.

The study also shows how injuries affect not only the service members, but also their spouses. Miller said that if a veteran has a severe injury, his or her spouse may curtail their work in order to care for the injured spouse.

Of the more-serious combat injuries — many of which resulted in a VA disability rating — combined earnings of the veterans and their spouses fell by an average of 41 percent four years following deployment. Even among those with comparatively minor injuries, earnings dropped by 3 percent to 10 percent. On average, these earnings losses were more than fully offset by federal disability payments for the most-seriously injured and partially offset for the less-seriously injured.

"The fact that some service members are compensated above their expected earnings loss may make sense after taking into account the fact that employees typically see their wages grow over time, but disability payments typically don't grow at the same rate," Heaton said. "Moreover, combat injuries such as the loss of a leg or a brain injury have effects that can't be fully measured or addressed solely through compensation."

The study, "Compensating Wounded Warriors: An Analysis of Injury, Labor Market Earnings and Disability Compensation among Veterans of the Iraq and Afghanistan Wars," can be found at www.rand.org. David Loughran also co-authored the study.

Research for the study was sponsored by the Office of the Secretary of Defense under the auspices of the 11th Quadrennial Review of Military Compensation and 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.