Association for Public Policy Analysis & Management

There are 18.5 million veterans in the United States, comprising 7.4 percent of the U.S. population, with approximately 7.0 million of these individuals in the labor force (American Community Survey 2016). While mortality rates of veterans of prior wars rising as these populations age, veterans of recent wars in Afghanistan and Iraq are entering the civilian labor force at a steady rate. The U.S. Army is undergoing its most dramatic drawdown since the end of the Cold War. By the end of 2018, the number of active duty soldiers in the U.S. Army is scheduled to reach 450,000, representing a nearly 20 percent decline from 2012. Despite the recent surge of separating soldiers into the civilian labor market, we know very little about how modern warfare in the post-September 11 era has impacted the economic transitions of new veterans.

The current study exploits newly available administrative panel data to examine the economic transitions of separating veterans. This comprehensive dataset links military records compiled by the Army Office of Economic & Manpower Analysis (OEMA) at the U.S. Military Academy with individual-level data from the U.S. Department of Veterans Affairs, Federal and state Departments of Labor, and the National Student Clearinghouse. Together, these data include the universe of enlisted active duty soldiers who separated from the U.S. Army between 2001 and 2016 and covers each soldier’s post-separation civilian transition.

We exploit a natural experiment in U.S. Army deployment assignments to estimate the causal impact of combat service on separating soldiers’ use of VA benefits programs, attachment to the civilian labor force, and longer-run human capital acquisition. Our findings show that combat deployment assignments are associated with substantially increased risks of diagnoses of and eligibility for VDC benefits for Post Traumatic Stress Disorder (PTSD) and Traumatic Brain Injury (TBI). The magnitudes of these effects are large and suggest additional costs of almost $40 billion and $20 billion, respectively. We also find that combat assignment is associated with small increases in UCX applications, consistent with combat-induced challenges of integrating into the civilian labor market as well as disincentives to transition given the generosity of benefits.

We further find that combat assignment is associated with a significant reduction in educational attainment during enlistment, which may, in part, explain modest increases in enrollment in the post-9/11 GI Bill. However, we find very little evidence that these benefits translate to increases in post-separation human capital acquisition. Our estimates show that longer combat deployments are associated with substantial declines in the probability of receiving a college degree. Deployments of over 18 months are associated with a 4 to 10 percent decline in the probability of four-year college graduation. These adverse effects are concentrated among white, married veterans who attained the rank of junior or senior NCOs. Finally, our results show that unit-level combat exposure, measured by deaths and injuries to comrades, is associated with substantially increased reliance on transition benefits and diminished human capital acquisition.