Do Veterans Face Disparities in the Labor Market—And What Accounts for Them?

Rajashri Chakrabarti, Dan Garcia, and Maxim Pinkovskiy

We proceed our sequence on army service and contemplate veterans’ earnings and labor market outcomes. We discover that veterans earn greater than 12 % much less and are 4 proportion factors (18 %) extra prone to be out of the labor drive than comparable nonveterans. Apparently, accounting for veterans’ variations from comparable nonveterans by way of schooling and incapacity standing largely explains these labor market variations.

As within the previous post—recognizing that veterans and nonveterans differ alongside many dimensions moreover veteran standing—we assemble a comparability group of nonveterans by proscribing it to male highschool graduates, and reweighting them in order that their distributions of age, race, ethnicity, and birthplace match these of veterans. For instance, if labor drive participation declines with age, then a bunch that’s older on common will even have decrease labor drive participation. Nevertheless, variations in labor drive participation between teams with the identical age distribution are extra significant.

Veterans Much less More likely to be within the Labor Pressure and Earn Much less on Common

Sources: American Group Survey; authors’ calculations.

Unemployment and Earnings

We first see within the left panel that, relative to comparable nonveterans, veterans have decrease employment charges, pushed by decrease labor drive participation. Within the 2019 five-year American Group Survey (ACS)—the final one earlier than the onset of the COVID-19 pandemic—75 % of veterans had been employed, in comparison with 79 % of comparable nonveterans (the employment price for the final inhabitants on the time was round 80 %). Do veterans have decrease employment charges as a result of they’re on the lookout for jobs however can’t discover them (unemployment) or as a result of they aren’t even on the lookout for jobs (nonparticipation)? The reply is emphatically the latter. Unemployment charges for each veterans and comparable nonveterans had been equal at about 3 %. Then again, 22 % of veterans had been out of the labor drive, in contrast with solely 18 % of comparable nonveterans. Relative to a comparable nonveteran, a veteran is about 22 % extra prone to be out of the labor drive.

Subsequent, we see that veterans earn much less on common than nonveterans. On common, within the 2019 five-year ACS, veterans earned $51,900 per yr, whereas comparable nonveterans earned $59,200—over $7,000 extra per yr, or over 12 % extra. Though a part of this distinction is accounted for by decrease labor market participation amongst veterans, if working veterans and nonveterans earned the identical wages, the labor drive participation distinction would clarify lower than half of the earnings differential.

Training and Incapacity Variations Largely Clarify Participation Hole

Labor Pressure Participation

Within the opening post of this series, we confirmed that relative to comparable nonveterans, veterans have decrease instructional attainment and usually tend to have disabilities. Can these disparities clarify the labor market variations we observe right here? Within the chart above, the leftmost bar reveals the unconditional (uncooked) distinction in labor drive participation charges for veterans vs. comparable nonveterans—practically 4 proportion factors. The following bar to the proper reveals this distinction accounting for the truth that veterans are more likely to be disabled than comparable nonveterans. The differential drops by half, to lower than 2 proportion factors.

The following bar reveals the labor drive participation distinction now accounting for the truth that veterans are much less prone to have faculty and superior levels than nonveterans, however not accounting for the incapacity distinction. That is to see whether or not and the way a lot schooling, separate from disabilities, can clarify labor drive participation differentials. The differential accounting for instructional variations is decrease than the unconditional one, however by lower than we noticed when accounting for disabilities, about 3 proportion factors. Lastly, the rightmost bar reveals the distinction when each schooling and incapacity standing is accounted for. Conditional on schooling and incapacity standing, veterans proceed to take part within the labor drive lower than comparable nonveterans do however by a a lot smaller margin, only one proportion level.

Training and Incapacity Variations Largely Clarify Earnings Hole

We see an identical image when taking a look at earnings. The unconditional earnings distinction, as mentioned above, is roughly $7,000. Accounting for variations in incapacity standing between veterans and nonveterans reduces this hole to slightly below $5,000. Accounting for variations in instructional attainment (however not incapacity standing) leads to a good bigger discount on this hole, to lower than $4,000. That is in contrast to the image we had with labor drive participation, the place incapacity standing fairly than instructional attainment was a stronger issue enjoying into the veteran-nonveteran distinction. Lastly, accounting each for variations in schooling and in incapacity standing between veterans and comparable nonveterans decreases the earnings hole to beneath $2,000.

Our evaluation doesn’t present causal results of veteran standing on labor market outcomes. Nevertheless, it does doc massive disparities in labor drive participation and earnings between veterans and nonveterans who’re comparable alongside a big variety of demographic and geographic dimensions. The variations in schooling and incapacity standing that we present within the earlier submit, nonetheless, statistically account for many of the veterans’ labor market disparities. Extra analysis is required to take a look at what are the causal results of army service on subsequent life outcomes within the post-draft period and the way public insurance policies ought to modify. Moreover, be aware of a brand new month-to-month product—Equitable Growth Indicators (EGI)—by which we monitor information related to outcomes by race/ethnicity, gender, revenue, age, veteran standing, and geography. The charts and temporary takeaways make clear disparities in folks’s expertise of inflation, earnings, employment, and shopper spending.

Rajashri Chakrabarti is the pinnacle of Equitable Progress Research within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.  

Dan Garcia is a analysis analyst within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.

Maxim Pinkovskiy is an financial analysis advisor in Equitable Progress Research within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.

How one can cite this submit:
Rajashri Chakrabarti, Dan Garcia, and Maxim Pinkovskiy, “Do Veterans Face Disparities within the Labor Market—And What Accounts for Them?,” Federal Reserve Financial institution of New York Liberty Avenue Economics, Could 25, 2023, https://libertystreeteconomics.newyorkfed.org/2023/05/do-veterans-face-disparities-in-the-labor-market-and-what-accounts-for-them/.