How Do Earnings Change When Reservists Are Activated?

A Reconciliation of Estimates Derived from Survey and Administrative Data

by Paco Martorell, Jacob Alex Klerman, David S. Loughran

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Among the many hardships of military activation is the possibility of losing earnings, and although some research points to such a loss, other research suggests that reservists in fact earn substantially more when they are activated. The authors examine earnings reports from the 2004 and 2005 Status of Forces Survey of Reserve Component Members (SOFS-R) and those from administrative data — the Social Security Administration and military pay records — to help reconcile these differing estimates. Broadly speaking, the administrative data indicate significant average earnings gains whereas the SOFS-R indicates significant average earnings losses. The authors propose several reasons for these opposite conclusions: different samples of reservists surveyed, the way earnings are defined, and the time period over which earnings comparisons are made. They also investigate several other possibilities, including reservists' misreporting or underreporting earnings, the effects of nonresponse bias, and errors in administrative data records.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data and Methods

  • Chapter Three

    Decomposing Differences in Estimated Earnings Changes

  • Chapter Four

    Analysis of Nonresponse Bias

  • Appendix A

    Administrative Data Estimates of Changes in Reserve Earnings Attributable to Activation

  • Appendix B

    Exact Wording of 2004 and 2005 SOFS-R Earnings Questions

  • Appendix C

    Detailed Analysis of Differences in Military Earnings

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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