New veterans—those who left US military service recently—have higher unemployment rates than both older veterans and civilians, according to a new research paper from the Chicago Fed. Even taking into account the age and education level of new veterans, "neither demographics nor simply being a new veteran by themselves can account for the rise in relative unemployment rates for new veterans," the paper says. "Instead, our results suggest that prolonged deployments overseas account for much of the difference in unemployment rates between recent veterans and nonveterans."
First, the significant gap in unemployment between recent veterans and others:
Recent veterans have fared relatively poorly in the labor market during and after the Great Recession. As figure 1 shows, veterans who had recently served in the military had higher unemployment rates than older veterans and nonveterans over this period. The three-month moving average of unemployment peaked for recent veterans at 13.9 percent of the labor force. The unemployment peak for nonveterans was 9.2 percent, while the peak for older veterans was 7.9 percent. Unemployment remained high for recent veterans throughout most of this time, before falling sharply in 2012. In contrast, during the previous recession and subsequent "jobless recovery" (early 2001 through late 2003), unemployment rates for recent veterans and nonveterans were nearly identical.
And, perhaps most notably, the Fed's hypothesis that overseas deployment itself (rather than macroeconomic conditions at home) is the cause of this phenomenon:
Being a new veteran when the percentage of service members deployed overseas rises by 1 percentage point predicts a 7 percentage point increase in the probability of being unemployed. Thus, once we control for all factors, extended wartime deployments, not the effects of the Great Recession, appear to account for the relatively high unemployment rates among recent veterans.
So during wartime, we not only send soldiers off to risk their lives in battle; we vastly increase their chances of unemployment when they get home.