Between 2000 and 2011, younger veterans were more likely to be unemployed than younger non-veterans. This difference falls rapidly with age and time. The evidence supports the hypothesis that veteran unemployment reflects engagement in job search. There is little evidence that veterans are disadvantaged in the labor market. Limiting benefits to veterans might reduce the length of unemployment spells, but the budgetary effect is unclear.

Why Is Veteran Unemployment So High?

David S. Loughran

ResearchPublished Jun 25, 2014

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According to official statistics, the unemployment rate of young military veterans ages 18-24 reached 29 percent in 2011. This report seeks to put that statistic in perspective by examining the historical time-series of veteran unemployment, comparing the veteran unemployment rate to that of non-veterans, and examining how veteran unemployment varies with time since military separation. Between 2000 and 2011, younger veterans were, on average, 3.4 percentage points more likely to be unemployed than similarly situated younger non-veterans. However, this difference between veteran and non-veteran unemployment falls rapidly with age and time since military separation. The report concludes that the best available evidence supports the hypothesis that relatively high rates of veteran unemployment reflect the fact that veterans, especially younger veterans, are more likely to have recently separated from a job — namely, military service — and, consequently, are more likely to be engaged in job search, which takes time, especially during periods of slow economic growth. The available evidence lends little support to the hypothesis that veterans are inherently disadvantaged in the civilian labor market. Limiting unemployment benefits available to recently separated veterans would likely reduce the length of unemployment spells, but the net effect of such a policy action on the long-term federal budget is unclear. There is very limited evidence on the effectiveness of other federal policies aimed at facilitating the transition of veterans into the civilian labor market.

Key Takeaways

It Takes Time for a Young Veteran to Find a Civilian Job

  • Young veterans are more likely to be unemployed than their non-veteran peers, but this gap closes quickly with age and time since separation from the military.
  • The best available evidence supports the hypothesis that relatively high rates of veteran unemployment reflect the fact that veterans, especially younger veterans, are more likely to have recently separated from a job — namely, military service. Consequently, they are more likely to be engaged in job search, which takes time, especially during periods of slow economic growth.
  • The available evidence lends little support to the hypothesis that veterans are inherently disadvantaged in the civilian labor market.

Five Hypotheses for High Veteran Unemployment, Examined in Light of Research Findings

  • High veteran unemployment could be caused by poor health, selection, employer discrimination, skills mismatch, or job search.
  • Of these five possible causes, only job search speaks to the short-term spike in unemployment found in recent data on veterans newly separated from the military. Although they may be more likely than non-veteran peers to suffer an injury that affects ability to work, the evidence does not support this as a cause of elevated unemployment. According to the data, veterans are no more likely than non-veteran peers to have observable characteristics that would lead to difficulty in finding a civilian job (in fact, there is evidence of the opposite effect). Whatever skills mismatch may exist during the transition to the civilian labor market seems to be quickly overcome with education and training. Some employers discriminate against veterans, and more research is needed to understand this phenomenon, but there is no existing evidence that employer discrimination plays a major role in veterans' employment outcomes. Ultimately, the preponderance of evidence at this time points toward the simple explanation that veterans, being newly separated from (military) jobs, will inevitably be unemployed for a period while they search for suitable new ones.

Recommendation

  • Policymakers who wish to address veteran unemployment should focus attention on policies and programs that facilitate more efficient job search.

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Loughran, David S., Why Is Veteran Unemployment So High? Santa Monica, CA: RAND Corporation, 2014. https://www.rand.org/pubs/research_reports/RR284.html.
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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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