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Activation and the Earnings of Reservists

by David S. Loughran, Jacob Alex Klerman, Craig Martin

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Activation imposes a variety of costs on reservists. Among those costs is a potential decline in earnings during the period of activation. In this study, RAND researchers compute how earnings change when a reservist is activated using administrative data on military and civilian earnings obtained from the Department of Defense (DoD) and the Social Security Administration (SSA). The study employs a comprehensive measure of annual earnings and covers the experiences of virtually all reservists activated in support of the Global War on Terrorism through 2003. Contrary to conventional wisdom and DoD survey evidence, the RAND study indicates that, on average, the earnings of reservists increase substantially when activated. Moreover, earnings gains increase with length of active duty service. Some reservists do experience an earnings loss when activated, but the probability of experiencing an earnings loss declines with length of active duty service. Even so, these large earnings gains may be insufficient to compensate reservists for the hardship of active duty.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data and Methods

  • Chapter Three

    Gross Effect on Mean Earnings

  • Chapter Four

    Net Effects on Mean Earnings

  • Chapter Five

    Gross and Net Effects on Earnings Loss

  • Chapter Six

    Preliminary Results for 2004

  • Chapter Seven

    The Effect of Activation on Postactivation Earnings: Early Estimates

  • Chapter Eight

    Conclusion

  • Appendix A

    Pending Earnings Replacement Legislation

  • Appendix B

    Components of Regular Military Compensation

  • Appendix C

    Some Technical Results on Estimation

  • Appendix D

    Alternative Base Years

  • Appendix E

    An Alternative Measure of Net Loss

  • Appendix F

    Detailed Description of the Alternative Method

  • Appendix G

    A Note on Selection with Changing Probability of Activation

Research conducted by

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

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