We find that for young veterans from the draft era, entering the
civilian labor market during a period of relatively high unemployment
has negative and long-term effects on these veterans’ outcomes. In
particular, we find statistically significant, negative, and substantive
effects on earnings for a long period of time. We also find evidence
that veterans might react by delaying retirement or potentially even
un-retiring in old age. It is worth noting that these findings hold
regardless of the fact that veterans who enter the labor market in weak
conditions obtain most post-secondary education than other veterans.
Finally, veterans who come to the civilian labor market in periods of
high unemployment are less likely than other veterans to marry or to
live in coupled households.
Our results hinge on comparing two groups of veterans—those who enter
the labor market in relatively positive economic conditions with lower
rates of unemployment and those who enter in less positive conditions
with higher rates of unemployment. In each case, we select veterans who
served for a relatively brief period of time; many of these veterans
were drafted (or draft-induced volunteers who enlisted to pick the
Service they preferred) and thus the timing of their entry into the
labor market was controlled not by their preferences but by the timing
of world events.
Our results suggest that the negative impacts of entering the labor
market during an economic downturn are both substantive and very
long-lasting. While providing opportunities for additional
post-secondary education or training are likely to be helpful to young
workers who, by timing of birth, enter the labor market during economic
downturns, our results suggest that such programs may not make up for
the total impacts. Indeed, our results suggest that the effects are
likely to remain discernable up to the point of retirement. Our sample
of veterans appear, eventually, to recover from the initial labor market
conditions they faced—but some may only complete that recovery by
working longer as they approach retirement age. While today’s younger
workers face different retirement constraints (in terms of the age at
which they will be eligible to collect Social Security), our results
suggest that those who entered the labor market during the Great
Recession may respond to the initial labor market conditions throughout
their careers.
This finding should be of interest to policy makers working to help
smooth current active duty military personnel’s transition into the
civilian labor force. Similar effects could exist for other groups
studied before (high school graduates, college graduates, etc.). Our
findings have implications for today’s young workers, many of whom
entered the labor market during periods of historically high
unemployment rates. They could also have implications for the future
costs of Social Security.