This comprehensive, quantitative assessment of how injury sustained by service members deployed to Iraq and Afghanistan affects their subsequent labor market earnings also explores the extent to which retirement and disability payments compensate for any resulting earnings losses. The analysis controls for a rich array of individual-level characteristics, including labor market outcomes prior to deployment.

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Compensating Wounded Warriors

An Analysis of Injury, Labor Market Earnings, and Disability Compensation Among Veterans of the Iraq and Afghanistan Wars

by Paul Heaton, David S. Loughran, Amalia Miller

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Research Questions

  1. How do injuries sustained while deployed in support of Operation Enduring Freedom and Operation Iraqi Freedom affect subsequent labor market outcomes?
  2. To what extent do retirement and disability payments received from the Department of Defense, the Department of Veterans Affairs, and the Social Security Administration compensate for earnings losses attributable to injury?

A substantial number of the service members deployed to Iraq and Afghanistan since September 11, 2001, have been injured in combat operations or as a result of other deployment-related activities. In response to a request from the 11th Quadrennial Review of Military Compensation (QRMC), RAND performed a comprehensive, quantitative assessment of how injury sustained by active and reserve component service members affects their subsequent labor market earnings and the extent to which retirement and disability payments received from the Department of Defense, the Department of Veterans Affairs, and the Social Security Administration compensate for earnings losses attributable to injury. This analysis compares the labor market earnings of injured service members and their spouses with the labor market earnings of uninjured service members and their spouses as many as seven years following deployment. Since the incidence of injury is likely to be correlated with characteristics of service members (e.g., pay grade, military occupation, risk-taking behavior) that could themselves be correlated with labor market outcomes, the analysis controls for a rich array of individual-level characteristics, including labor market outcomes prior to deployment. The results of the analysis show that earnings losses attributable to injury increase with injury severity and that disability payments on average more than compensate for these lost earnings. Due to disability compensation, the income of service members with serious or very serious injuries is on average about 36 percent higher four years following deployment than it would have been had they not been injured.

Key Findings

Combat Injuries Decrease Post-Deployment Earnings

  • Combat injuries decrease household labor market earnings, with the seriously injured experiencing greater losses than those with less-serious injuries.
  • Disability compensation paid to injured service members (over and above that paid to uninjured service members) between 2001 and 2010 totaled 107 percent of estimated lost household earnings.

Recommendation

  • On average those injured in recent combat operations are more than fully compensated for economic losses due to injury, but there is variation in loss and compensation by injury severity and component of service that policymakers may wish to address through changes to existing compensation programs. It may be logical to provide benefits above full replacement initially to account for the fact that those with permanent disability will not enjoy the earnings growth their uninjured peers can expect.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data

  • Chapter Three

    Descriptive Statistics on Injury, Earnings, and Disability Compensation

  • Chapter Four

    Empirical Model

  • Chapter Five

    The Effect of Injury on Earnings and Other Labor Market Outcomes

  • Chapter Six

    The Effect of Injury on Household Income Including Disability Compensation

  • Chapter Seven

    Discussion

  • Appendix A

    Specification Checks

  • Appendix B

    Distribution of Estimated Replacement Rates

Research conducted by

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted within the RAND National Defense Research Institute, a federally funded research and development center sponsored by OSD, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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