Enlisting in the Military Increases Earnings, But Only If You Stick Around

A new RAND research report prepared for the U.S. Army explores the effect of military enlistment on individual earnings and the labor market. The authors used data from applicants to “active-component enlisted service” from 1989 through 2003, and followed them for up to 18 years. From the report:

Each year, more than 150,000 young men and women enlist in the active component of the U.S. military. The experience of these enlistees while serving their country will undoubtedly influence their long-run labor market outcomes, but just how is not well understood. The research described in this report seeks to estimate the causal effect of military enlistment on labor market earnings and educational attainment as many as 18 years following enlistment.

The authors find that military enlistment increases earnings in both the short and long-term: The percentage increase in earnings attributable to enlistment is about 40 percent in the first few years following application and diminishes to about 11 percent 14–18 years following application. Enlistment significantly delays college education in the short run. In the longer run, enlistment slightly increases the likelihood of attaining a two-year college degree, but it also decreases the likelihood of attaining a four-year college degree, especially among higher-aptitude youth.

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The study finds that there are three main time periods in a soldier’s earnings. The first is when the applicant is still serving in the military, and completing active service – this period has a positive economic effect. However, in the years after enlistment most applicants don’t go straight into full-time employment. Whether it’s due to college or something else, this second period sees a drop in earnings. In the third period, earnings are positive again.

The most puzzling result is the 11% bump in long-term military earnings compared to civilian workers. It’s not education gains, but rather labor gains:

“(1) military service develops other skills that are valued in the labor market and (2) the military pays above-average wages in order to compensate individuals for their sacrifice and service (a “compensating wage differential”). We do not directly test these alternative hypotheses, but we do find that the positive effect of enlistment on longer-run earnings is concentrated among enlistees who are still serving in the active component.”

So, staying long-term in the military creates a much higher income for the average soldier due to above-average wages, but soldiers who leave active service still have about a 6% advantage compared to their civilian counterparts, according to the data.

The study concludes that for most enlisted soldiers, military service does provide benefits for long-term earnings. However, those benefits are far greater for soldiers who choose to stay in the military.

Can these effects be viewed in unemployment data? Perhaps. Among what the Labor Department refers to as the Gulf Era II generation, those who served in the military at any time since September 2001, the unemployment rate is 11.5%. But among the older Gulf Era I generation, the rate is 7.7%.


Mike B

I would bet that for enlisted personnel military service takes the place of the sort of robust technical education seen in other countries. Remember that only a small proportion of military enlistees are actively engaged in shooting people or busting down doors. Especially in the Navy and Air Force, most of the senior enlisted personnel are either doing highly technical work or various types of first tier supervision. Both are valued job skills and lack sufficient supply from the traditional education system.

Regarding the differential for those that stay in the military remember the generous pension benefits and also the fact that those who are of lower overall skill levels will be passed on for promotions and other higher quality assignments and will probably give up after a tour or two of unfulfilling work so there is probably a survivorship bias.

nobody.really

What Mike B said: I suspect selection bias drives the results.

The most puzzling result is the 11% bump in long-term military earnings compared to civilian workers.

Does the study really compare long-term military earnings to civilian "workers"? Or does it compare the earnings of these two groups:

-- People who applied to enlist in the military, were accepted, demonstrated their usefulness to the military, and are in fact employed in senior positions, vs.

-- ALL OTHER PEOPLE of the same cohort who applied to enlist in the military, whether or not those people are currently employed or employable?

I would be astonished NOT to find an earnings differential between these two groups. I suspect that the most relevant explanatory variable is long-term employment with a history of advancement, not military training per se. I would expect to find an earnings differential between pretty much any analogous groups, regardless of the nature of the employment.

This is a far cry from suggesting, for example, that a random person would be more likely to achieve higher earnings by applying to enlist than by pursuing other options.

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Joshua Northey

My thoughts exactly,it all depends on the samples and the control group selection. Is it people from similar socio-economic backgrounds to enlistees, people who enlisted but failed, the general population, et cetera. It matters a lot.

They always pull this trick with student-athletes and high schools. The student athletes are hailed as being better students than the student body in general, and they are. But it is the outcomes of the bottom 10-25% whose grades are so abysmal they couldn't even play sports that are driving that. On top of this if athletes fall into that "troubled" group they get eliminated form the team, guaranteeing there will be no "troubled" student-athletes.

Of course if you compare them to the group of students who participate in anything extracurricular at school they under-perform badly.

econobiker

"11% bump in long-term military earnings compared to civilian workers"

Health insurance is one savings for the military.

DaveyNC

Do you really think so? They deal with some pretty severe medical conditions, probably much worse than the civilian sector.

pawnman

The individual soldiers (and their families) have their medical care covered by the military. Hence, they save on health insurance and medical bills.

Caleb b

I don't know if this has been covered in the study, but there needs to be a control for the type of employer. Prior military service gives you an advantage when applying for government jobs, which we already know pay higher wages than comparable private sector jobs. Some of the bump might be due to employer preference rather than skill set.

Anecdotal point: an assistant DA of a neighboring city went to law shool with my wife. At least 25 of her classmates applied and the person with the lowest grades and experience got the job. Why? She had been in the army.

Charles Vroman, Sr.

Having been medically retired after 22 years of service, I think I would have to differ with the statement made stating "the military pays above-average wages in order to compensate individuals for their sacrifice and service (a “compensating wage differential”)". I really do not think that any company could get away with paying someone in middle management to work 22 hours a day, 7 days a week, in an isolated situation underwater for 90 - 108 days away from all other remnants of humanity, in charge of 22 personnel and the operation and maintenance of a highly complex weapons system at a rate of $32,000 a year in 1991. Even back then, that was ludicrously low!

It is really interesting how these companies come up with these statistics saying how the military is so well paid! If they are so well paid, why don't some of you rich S.O.B.s get off your high horses and get down in the trenches with the real workers of the world and see what the enlisted military members get paid for what they actually do. Granted, the pay now is FAR above what it was when I enlisted, but it still does not equate to the civilian bonuses and perks that are available at a lot of jobs.

Be careful what you print - it WILL come back to haunt you!

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