A Stanford economist’s latest research on veterans isn’t promising. According to Mark Duggan, veterans face the worst employment prospects ever seen and are filing for disability compensation claims at astonishing rates.
During his research, Duggan looked at the data from 1950 to 2014 and came to a stunning conclusion: an increase in available disability compensation has led to a decrease in job market entry rates for veterans. The main reason Duggan cites is that disability benefits have acted as disincentives to work, disincentives that have ramped in the past decade. From 1950 to 2000, veterans on disability only amounted to 8 to 10 percent of the total veteran population.
However, that number in 2014 jumped to 18 percent. Enrollment increased from 2.3 million in 2001 to 3.9 million in 2014. What’s especially interesting is that the dramatic increase occurred during a 16 percent reduction in the actual number of military veterans.
The change began in 2001 when benefits policy started allowing veterans of the Vietnam War to claim benefits for exposure to Agent Orange. In 2000, the Institute of Medicine found a link between exposure to the chemical and likelihood of developing Type II diabetes. U.S. forces used Agent Orange to decimate jungles, in order to prevent the Viet Cong from hiding in the foliage. Soon after, ischemic heart-disease, Parkinson’s, and B-cell leukemia were added to the list of conditions under which benefits could be claimed.
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“Enrollment among Vietnam-era veterans grew substantially thereafter,” Duggan, the Wayne and Jodi Cooperman Professor of Economics, noted.
With more veterans eligible for disability benefits, Duggan found that labor force participation started immediately declining, in perfect demonstration of what economists call the “income effect” which predicts that as income increases, desire for leisure also increases.
“Our estimates suggest that for every 100 veterans made newly eligible for disability benefits as a result of the 2001 policy change, approximately 18 dropped out of the labor force by 2007,” Duggan found.
President Barack Obama has long advocated for companies to adopt a more generous hiring stance toward veterans. In 2011, Obama signed The Vow to Hire Heroes Act into law which combines tax credits into a single, large package. Veterans already receive preferential hiring treatment in the civil service and constitute a third of the total federal workforce. And earlier this year, First Lady Michelle Obama launched the online Veterans Employment Center to bring job opportunities directly to interested veterans.
“Our service members transitioning to civilian life, as well as their spouses, deserve the resources they need to be successful,” said Secretary of Defense Chuck Hagel, as part of the new online service’s announcement
Duggan’s study, however, shows that the problem of veteran unemployment might not be a resources problem. Instead, the simpler policy move may be to reduce or at least slow the growth of available benefits instead of throwing even more money as incentives for companies to hire veterans. Reducing benefits would “increase veterans’ financial incentive to work and could substantially increase both their health and their economic well-being,” he said.
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