ERS Group Insights

Each day ERS Group’s experts interact with clients engaged in complex legal, regulatory, and business matters. Our work requires us to remain up to date with these issues, and we share our insights through our blog.

Understanding Veterans' Employment Patterns

- Tuesday, March 24, 2015

BLS data from 2014 reveal that unemployment rates for male veterans decreased overall, and even more noticeably for Gulf War II era veterans. Yet, there continues to be a concern over why recent male veterans have higher unemployment rates than male nonveterans. 


The OFCCP weighed in on the issue in 2013, stating that “though it is unclear what portion of disparities [in unemployment and earnings between protected veterans and nonveterans] is caused by discrimination,” the agency intended to advance employment of veterans by revising the implementing regulations of the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Given this final rule and additional OFCCP regulatory changes and self-identification mandates regarding protected veterans and individuals with disabilities, it is in employers’ interest to understand the dynamic nature of this controversy.

While there is justifiable concern over the jobless rate among the veterans, particularly as the economy is recovering from the recent recession, economists are also observing a declining trend in labor force participation rates (when some individuals stop looking for employment altogether) in the general population, as well as among veterans relative to nonveterans. According to the BLS Current Population Survey (CPS) estimates, labor force participation rates of nonveteran men 18 years and over declined by approximately 6 percentage points between 1999 and 2014, while these rates declined by approximately 10 percentage points for male veterans.


NBER Study of Veterans' Employment

A recent National Bureau of Economic Research (NBER) study suggests that male veterans’ declining labor force participation rate coincides with the rising role of the Veterans’ Affairs Disability Compensation (DC) program and liberalization of medical eligibility criteria during the last 13-14 years.  In the study “Veterans’ Labor Force Participation: What Role Does the VA’s Disability Compensation Program Play?” Coile, Duggan and Guo use 35 years of March CPS data to examine how the proportion of male veterans employed or looking for work has declined relative to male nonveterans since the early 2000’s. The percentage of male veterans receiving disability compensation benefits roughly doubled from about 9 percent in 2001 to 18 percent in 2014 (following a period of 50 years in which the percent of veterans receiving disability compensation varied narrowly between 8 and 10 percent). This sharp increase coincides with changes in VA policy that had the effect of increasing the number and types of medical conditions for which veterans could be considered to have a service-connected disability. In addition, these policy changes are associated with an increase in the number of beneficiaries with higher combined disability ratings (CDRs) and a jump in the average inflation-adjusted monthly benefit amount (an increase of 46% from 2001 to 2013).

NBER Study Analyzes Employment Statistics 1980 - 2014

A regression model controlling for year, age, race, and ethnicity was used to analyze the effect of being a male veteran on the probability of being in the labor force. The model was estimated for seven separate 5-year periods from 1980-1984 to 2010-2014, including all 25 to 64 year old male veterans and nonveterans. From this model, the study authors found evidence that male veterans were more likely to be in the labor force than nonveterans up until 1995-1999, but less likely from 2000-2004 and 2010-2014, the time frames that coincide with the liberalization of the medical eligibility criteria.

NBER Study Further Analyzes Employment Statistics and Service Periods

The second set of analyses in the NBER study attempts to account for the veterans’ period of service by dividing the veteran and nonveteran males into separate age bands, specifically 25-34, 35-54, 55-64, and 65-74, and re-estimating the model separately for those age bands over the 5-year time periods referenced above. For example, most of the veterans who were in their 50s in 2000-2004 (and aged thereafter) would be Vietnam veterans and the ones presumably most affected by the “Agent Orange” decision in 2001, when Type II diabetes was recognized as a service-connected medical condition for “boots-on-the-ground” Vietnam veterans. Veterans who were 25-34 in 2010-2014 would be primarily post-9/11 veterans serving in the Gulf War region and should be most affected by the changes in disability eligibility rules made in 2010. Those changes added chronic fatigue, fibromyalgia and unexplained illnesses linked to environmental exposure to the list of presumptive conditions, as well as eliminated the need to document specific events that caused post-traumatic stress disorder for veterans diagnosed with this condition.

The results of the second set of analyses are for the most part consistent with the NBER study authors’ hypothesis, namely, changes in disability benefits eligibility rules closely correspond to changes in labor force participation by those groups of veterans most likely to be affected by specific medical eligibility decisions. For example, male veterans who were 35-54 in 2000-2004, and are probably Vietnam veterans, were indeed more likely to be in the labor force than male nonveterans prior to 2000, but relatively less likely after “Agent Orange” medical eligibility criteria first came into play.

Alternative Statistical Considerations

In order to investigate the connection between medical eligibility criteria liberalization and male veteran labor force participation further, it would be interesting to control for the type and degree of disability, as well as composition differences among the veterans serving in different time periods. If the veterans that are included in the sample in the later periods are different with respect to personal characteristics than those that are included in the earlier period, then it may be those compositiol differences that are responsible for part of the relative increase in the proportion of veterans dropping out of the labor force in the later period. If that is the case, then it may not be appropriate to attribute all of the changes in relative labor force participation of veterans between the earlier and later periods to changes in eligibility requirements.

A potentially important composition difference between the male veterans in the periods prior to 2000 and after 2000 is the increasing proportion of post-9/11 male veterans who returned from their tours of duty in Iraq and Afghanistan in the later period. As the table below illustrates, a review of annual BLS news releases on the Employment Situation of Veterans from 1999 to 2014 reveals that a greater proportion of post-9/11 male veterans have reported service-connected disabilities or have more severe disability ratings than veterans serving in earlier periods, both before and after the 2010 eligibility criteria change affecting Gulf War era veterans. This higher propensity of recent veterans to report service-connected disabilities, regardless of the timing of the eligibility rules change, could account for some of the observed differences between the greater proportions of male veterans in the labor force in the early period of time rather than the later one.



As Coile, Duggan and Guo demonstrate in the NBER study, the changes in disability benefits eligibility rules closely correspond to changes in labor force participation by the groups of veterans most likely to be affected by those rules. But, as even these authors note, the true underlying causes of the changes in employment by male veterans over the time period may require additional research. And, as demonstrated by a review of BLS reporting on the Employment Situation of Veterans from 1999 to 2014, some of that change could be attributed to the increasing number of post-9/11, or Gulf War II era, male veterans in the last decade, combined with this group’s greater likelihood of being severely disabled.

Labor force participation rates and their projections for the general civilian population are well documented and investigated. The NBER study reviewed above adds to the research literature on the dynamics of labor force participation among veterans, examining possible explanations for the declining labor force participation rates connected with the changes in the Veterans’ Affairs Disability Compensation program. A review of 15 years of CPS data (as summarized by the BLS) on the Employment Situation of Veterans revealed that certain male veteran disability patterns might also suggest additional explanations for the changing dynamics in the employment of veterans.


For additional information on the OFCCP and veteran reporting requirements, visit our OFCCP Compliance page and read additional ERS Group blogs on these issues.




Copyright © 2010- ERS Group