The Effects of Active Duty on the Income of Reservists

and the Labor Market Participation of Spouses.

Matthew Dey

Joshua Pinkston

Using data provided by the Department of Defense merged with Unemployment Insurance wage records, we examine the effect of being called to active duty on the income of reservists and members of the National Guard.� We then consider the spouse�s labor market responses to both this temporary shock to income and the reservist�s deployment.

In contrast to a traditional displaced worker problem, being called to active duty makes the reservists less available for household production than they were prior to being called up.� If a reservist�s income falls (or if expected lifetime income falls) the spouse�s labor market participation may or may not increase.� If a reservist�s income rises when called to active duty (due to combat pay, etc.), the spouse�s labor market participation will likely fall, unless the increase in income is balanced out by a lower expectation of future income.�

Our preliminary results suggest that activation raises the earnings of reservists on average and lowers the probability of experiencing an earnings loss.� Additionally, we find that high levels of activation lower a wife�s earnings and employment, but the reservist�s earnings have no effect.