Caroline V. Crawford

The Labor Supply of Disabled Veterans: 1995-2014

Disabled veterans are less likely to work today than in the past; between 1995 and 2014, the percent of veterans who were working while receiving disability compensation from the Department of Veterans Affairs (VA) dropped from 62 percent to 49 percent. This drop has led the VA – which liberalized the list of health conditions that qualify veterans for benefits in the early 2000s – to face the same concern as the Social Security Administration: that the proportion of individuals receiving disability income who could work, but do not, has grown. Using the Current Population Survey’s Veterans Supplement, this paper finds that employment and labor force participation rates have fallen for disabled veterans only modestly more than for non-disabled veterans. Adjusting for the rapid aging of the disabled veteran population reduces the gap in labor market activity between disabled and non-disabled veterans by 40-70 percent. Although the share of veterans with disability ratings of 50 percent or greater (indicating severe disability) has increased, the most-disabled veterans have not reduced their labor market activity – if anything, their labor supply has actually increased. The results suggest that the decline in employment and labor force participation of disabled veterans is largely a function of age and the increased prevalence of severe disability and not a changing propensity for work. This finding should alleviate concerns that the Veteran’s Administration disability system is discouraging employment any differently than in the past.

Would Reducing the Price of Employing an Older Worker Improve Labor Market Outcomes by Socioeconomic Status? Evidence from Health Insurance Premium Restrictions

Delaying retirement improves retirement preparedness, but older workers cannot work longer if employers do not hire or retain them. This study examines one way in which public policy potentially makes older workers more attractive to employers: state regulatory restrictions on how much employer premiums are permitted to increase at small firms with older, unhealthier workforces. The study uses data from the Current Population Survey from 1989-2013 to compare older individuals’ overall employment, small-firm employment, and earnings in states with varying degrees of premium regulation, and among workers of different educational backgrounds. The analysis shows mixed results. Stronger premium regulations were not effective in increasing employment: employment at small firms, which are most sensitive to premium increases, saw no statistically significant increase, and overall employment for older workers at both large and small firms increased only slightly. The earnings gap between large and small firms is also smaller in states with tighter restrictions, but older workers were not helped appreciably more than younger workers. These results suggest that indirect efforts to lower the price of hiring an older worker are not likely to be effective in improving their job prospects.