Principal investigator: Eduarda Miller de Figueiredo
Article title: Why Do World War II Veterans Earn More than Nonveterans?
Authors: Joshua Angrist and Alan B. Krueger
Location of the Intervention: United States
Sample Size: 335.989 male individuals.
Sector: Labor market
Primary Variable of Interest: Salary
Type of Intervention: World War II
Methodology: 2SLS
Summary
Approximately 10 million men served in the World War II era, where the recruitment process followed a birth-chronology rule. Based on the results of a salary comparison between veterans and non-veterans, the authors seek to explore alternative explanations for the apparent success of World War II veterans in the civilian labor market. Using estimations with methods such as OLS and 2SLS, which control for possible endogeneities in this analysis, the authors concluded that World War II veterans do not earn more than comparable non-veterans.
- Policy Problem
The aim of this study was to explore alternative explanations for the apparent success of World War II veterans in the job market. This study is based on the fact that a comparison showed that, on average, World War II veterans earn more and have lower unemployment rates than non-veterans of the same age. In contrast, Vietnam War veterans earn less and have higher unemployment rates when compared to non-veterans.
These differences in the consequences of veteran status at different times raise questions about the functioning of the labor market and the armed forces. One hypothesis is that the Vietnam War was an unpopular cause, in which men who served during the war were discriminated against when they returned to the civilian labor market. While World War II was largely supported, veterans of that period received preferential treatment in civilian employment. Furthermore, according to the authors, positive sentiments about World War II may also have translated into political support for relatively generous subsidies for education and preferential treatment in hiring.
Another factor that may have influenced this differentiation in treatment, as the authors explain in the text, was the fact that young men from wealthy families avoided military service during the Vietnam War, while those from low-income families did not have the same option (Cooper, 1977). In World War II, almost 75% of eligible male cohorts served in the armed forces. Thus, these selection factors likely induced a positive bias in veteran award estimates for World War II veterans and a negative bias for Vietnam War veterans.
- Implementation and Evaluation Context
According to data obtained by the authors, approximately 16.354.000 men served in the armed forces during the World War II era (1940-1947), of which 10 million were drafted. Because the recruitment process followed a chronological order of birth, once the number of men needed to meet the quota at that time had been recruited, the "rest" were no longer at risk of recruitment. Thus, this process generated a correlation between birth date and the probability of military service.
Therefore, the authors' analysis focuses on those registered in the second part of the 6th register (born after 1925). 64% of those registered were exempted or rejected because they were classified as physically or mentally incapable, while the other 34% were "deferred" for professional reasons – wartime production –.
The minimum service period in the armed forces for draftees was 18 months, with an additional requirement to serve as reserves after the service period ended. This requirement was waived for recruits who agreed to remain in the regular army for an additional 24 months of service.
- Policy/Program Details
There were different convocation dates, totaling 7 national convocations during this period, in which almost all citizens and residents of the United States were required to register. The convocations followed these rules:
- From the 1st to the 4th call-up (1940-1942) – drawing of numbers through the local lottery (a technique known as “fish bowl"[1]).
- 5th and 6th call-ups (1942-1947) – numbers were assigned according to birthdays, with those born at the beginning of the year having a higher probability of being called up. The 6th call-up was divided into two parts, with the second part including men born between 1925 and 1929.
- 7th call-up (1947) – relatively small and involved only male citizens residing abroad.
- Assessment Method
This study aimed to re-examine the reward for World War II veterans using econometric techniques to control for non-random selection from the armed forces. Instrumental variables correlated with veteran status, but not correlated with other determinants of earnings, were used.
The authors used a 5% publicly available sample from the 1980 census, where the dataset contains information for a self-weighted sample of 11 million individuals in the US. Therefore, after proper data cleaning, the study contained information on 335.989 men.
An OLS (Online Logistics) was estimated using a human capital gains function, where the dependent variable is the log of wages.[2]However, since there is some level of endogeneity due to the Selection Service tending to reject registrants with low earning potential, the authors ran a 2SLS, in which the first stage is used to determine the veteran's status (dependent variable).[3]Therefore, an instrumental variables strategy was used to explore the relationship between date of birth and veteran status.
- Main results
The OLS and 2SLS model estimates presented very different results, where the salary of a veteran according to the OLS estimate is -22% while according to the 2SLS estimate it is -13%. There is also a contrast between the binary variables of race, marital status, residency status, and whether the individual works in a metropolitan area.
When considering the covariates of education and disability status, the veteran effect is still negative according to the 2SLS estimate. According to the authors, the attenuation in the 2SLS estimates may also reflect the fact that education levels were increasing for successive generations of men at this time. Similar to the effects of compulsory attendance laws, this would also lead individuals born earlier in the year, who are more likely to be veterans, to have less education and therefore earn less.
Estimates based on three censuses (1960, 1970, 1980), which follow the same cohort of men over time, show, according to the OLS estimate, that veterans' salaries decrease as the cohort ages. For example, when controlling only for year of birth, veterans earn 31% more than non-veterans in 1960, 26% more in 1970, and 22% more in 1980. According to the authors, this occurs because selection for military service took place in the 1940s, and the characteristics on which selection was based may have become diluted over time. For example, some individuals who were excluded from service due to a physical disability at age 18 may have recovered at least partially from the disability over the years.
Other estimates, using the 2SLS model, demonstrate that veteran wages are more negative in the 1980 census than in the 1960 and 1970 censuses. The explanation for this result, according to the authors, is the correlation between age, birth quarter, and earnings. Between 1960 and 1970, the cohorts examined were between 31-45 years old, meaning they would be on the upward-sloping portion of the cross-sectional age-based earnings profile. On the other hand, in 1980, this group of men reached 50 years of age or older, therefore, they would be at the peak or decline of the sloping part of this cross-sectional age-based earnings profile. This is based on Mincer's (1974) estimate that defines earnings peak at age 52 for those with a high school education and at age 56 for college graduates. In other words, in 1960 and 1970, men born at the beginning of the year were expected to earn more than men born at the end of the year, while in 1980 the opposite was expected.
- Lessons in Public Policy
Through estimations using robust endogeneity controls, the authors concluded that World War II veterans do not earn more than comparable non-veterans, and may well earn less. This demonstrates that military service may, in fact, have reduced the earnings of World War II veterans compared to what they would otherwise have been.
References
Cooper, VL Military Manpower and the All-Volunteer Force. Report R-1450-ARPA. Santa Monica, CA:RAND Corp., 1977.
Jacob Mincer. Schooling, Experience and Earnings. New York: National Bureau of Economic Research, 1974.
[1] Each element can be numbered using separate pieces of paper and placed in a container. After shuffling, each piece is randomly chosen one by one.
[2], j = (1926, 1927, 1928)
[3] , j = (1926, 1927, 1928)
