Compensating Wounded Warriors: an Analysis of Injury, Labor Market Earnings, and Disability Compensation among Veterans of the Iraq and Afghanistan Wars

Introduction -- Data -- Descriptive statistics on injury, earnings, and disability compensation -- Empirical model -- The effect of injury on earnings and other labor market outcomes -- The effect of injury on household income including disability compensation -- Discussion

A substantial number of the service members deployed to Iraq and Afghanistan since September 11, 2001, have been injured in combat operations or as a result of other deployment-related activities. In response to a request from the 11th Quadrennial Review of Military Compensation (QRMC), RAND performed a comprehensive, quantitative assessment of how injury sustained by active and reserve component service members affects their subsequent labor market earnings and the extent to which retirement and disability payments received from the Department of Defense, the Department of Veterans Affairs, and the Social Security Administration compensate for earnings losses attributable to injury. This analysis compares the labor market earnings of injured service members and their spouses with the labor market earnings of uninjured service members and their spouses as many as seven years following deployment. Since the incidence of injury is likely to be correlated with characteristics of service members (e.g., pay grade, military occupation, risk-taking behavior) that could themselves be correlated with labor market outcomes, the analysis controls for a rich array of individual-level characteristics, including labor market outcomes prior to deployment. The results of the analysis show that earnings losses attributable to injury increase with injury severity and that disability payments on average more than compensate for these lost earnings. Due to disability compensation, the income of service members with serious or very serious injuries is on average about 36 percent higher four years following deployment than it would have been had they not been injured