The Effect of Reserve Activations and Active-Duty Deployments on Local Employment During the Global War on Terrorism

by Bogdan Savych, Jacob Alex Klerman, David S. Loughran

Overview

Analyzes the impact of activations and deployments on local economic conditions, as measured by changes in local employment, postDSeptember 11, 2001.

Product Details

ISBN-13:	9780833039002
Publisher:	Rand Publishing
Publication date:	03/28/2006
Pages:	66
Product dimensions:	8.58(w) x 10.86(h) x 0.20(d)

Read an Excerpt

The Effect of Reserve Activations and Active-Duty Deployments on Local Employment During the Global War on Terrorism

---

By David S. Loughran Jacob Alex Klerman Bogdan Savych

RAND CORPORATION

Copyright © 2006 RAND Corporation
All right reserved.

---

Chapter One

INTRODUCTION

BACKGROUND

The ongoing Global War on Terrorism represents the largest deployment of American military power since the Vietnam War. The Global War on Terrorism has sustained high-tempo military operations for more than three years, and the Department of Defense (DoD) projects that operations in support of the Global War on Terrorism will continue for at least several more years. Hundreds of thousands of active-duty soldiers have been deployed from bases within the continental United States, and hundreds of thousands of reservists have been called to active duty and deployed overseas. These recent events have raised concern within DoD, within the reserve and active-duty communities, and among policymakers that large-scale and sustained activations and deployments might adversely affect service members, their families, and their communities in a variety of ways. This report examines the impact of activations and deployments on local employment.

Local employment could be negatively affected by activations and deployments for two reasons. First, the Uniformed Services Employment and Reemployment Rights Act (USERRA) guarantees activated reservists the right to return to their pre-activation job following activation, providing the jobstill exists. Therefore, employers of reservists cannot permanently replace activated reservists with new hires. Instead, they must find internal or temporary replacements for these workers. Alternatively, employers could leave the positions unfilled, which could make it difficult for them to maintain their pre-activation level of productivity.

Second, the demand for local goods might decline when reservists and active-duty members leave their communities, for two reasons. First, the reservists and active duty-members themselves are no longer present to demand goods and services from local businesses; second, the families of these service members might temporarily leave the community as well, further depressing demand.

Despite these concerns, there has been little systematic analysis of the impact of reserve activations and active-duty deployments on local economic conditions. Separate stories in the Washington Post (Finer, 2005) and the Los Angeles Times (Mehren, 2005) described the impact of reserve activations on local communities in Vermont, a state with an unusually high proportion of its population serving on active duty as reservists. One story describes the effect of having 88 men deployed from the rural town of Enosburg Falls, which, at the time the article was written, had a population of only 1,437; those 88 men are likely to represent about a quarter of prime-age males. The workers remaining are described as working long hours and covering multiple jobs (Mehren, 2005). According to the Washington Post's story, the loss of police and fire personnel have meant that some local public safety jobs are not being performed at their previous level (Finer, 2005).

Both stories quoted the same plant manager at a local seed company on how activations have affected his firm:

We've been hit hard. Some of these are highly specialized jobs, so it is very hard to find people who can step in and replace them [activated reserves]. And no one wants to come from another company when they know that these guys will come back in a year and a half. (Finer, 2005)

and

Everyone is working extra hard, and we have gone to a temp agency to try to fill the vacancies. It affects us because we have lost people with years of experience. You can't replace that. We have lost skill, not just employees. (Mehren, 2005)

We are aware of two published studies that have employed administrative or survey data to analyze how reserve activations affect local economic conditions. The Congressional Budget Office (CBO) (2005) combined descriptive data on reservists and their employers with data from 19 interviews with employers of reservists (including the self-employed) to draw conclusions about the potential effect of activation on employers. CBO notes, as we do below, that the scope of the problem is likely to be small because, by its estimates, only 6 percent of all business establishments employ reservists. Nonetheless, CBO argues that smaller firms, the self-employed, and firms employing reservists with highly specialized skills might be vulnerable to negative economic impacts attributable to activations. Combining data from the Defense Manpower Data Center (DMDC) on the characteristics of firms that employ reservists and the occupations of reservists within those firms, CBO (2005) estimates that about 0.6 percent of small businesses and 0.5 percent of self-employed individuals could be affected by the loss of a crucial employee (or owner) to activation.

Doyle et al. (2004) echo this concern in their report based on interviews with eight small businesses that received Military Reservist Economic Impact Disaster Loans. These loans are intended to help small businesses that have been adversely affected by the loss of activated reserve personnel. These interviewed firms reported losing business while their reserve employees were activated and even after they returned to work. The select nature of their sample, though, prevents them from generalizing their results to small businesses in general.

In addition to the impact on local businesses, public officials have expressed concern that reserve activations could adversely affect public safety employers. Unpublished analyses of the November 2004 Status of Forces Survey of Reserve Component Members (SOFRC) by DMDC (2005) show that about 17 percent of reserve respondents work as first responders and 18 percent work in emergency services. Of these reservists working as first responders, 53 percent reported working full time, 18 percent reported working part time, and 35 percent reported working as volunteers. Comparable percentages of reservists reported working as emergency responders. These statistics make clear that reservists are much more likely to work in public safety occupations than are non-reservists. In the 2000 U.S. Census, for example, only about 6 percent of males aged 18 to 40 reported working in public safety occupations. Unfortunately, it is difficult to extrapolate reliably from these statistics to infer how many public safety employers are potentially affected by reserve activations.

OBJECTIVES AND LIMITATIONS

In this report, we seek to analyze systematically how local economies respond to activations and deployments. We do so by employing econometric panel-data methods to analyze how variation in monthly counts of activated reserve and deployed active-duty military personnel correlates with variation in monthly employment at the county level. Our data permit us to disaggregate our results by county size and, to a very limited extent, by employer type. More disaggregated analyses might become more feasible in the future with the completion of DMDC's Civilian Employer Information database, which records detailed information from Dun & Bradstreet on most employers of currently employed selected reservists. Nonetheless, the results we report here provide a first systematic look at how local employment responds to activations and deployments in the short run.

Our focus is on the short-run impact of activations and deployments. More research is needed to understand the long-run impact of activations and deployments on profits and whether activations and deployments are particularly burdensome to smaller businesses and communities. We also note here that this report does not fully address the important question of how reserve activations affect the provision of local public safety and homeland defense (e.g., firefighters, police officers, emergency medical technicians [EMTs], National Guard members, and other "first responders"). Reservists are much more likely than other individuals to be employed in public safety occupations and, obviously, in the National Guard, and it could be particularly difficult for public safety employers to replace activated reservists in the short run. The appropriate balance between domestic and foreign uses of the National Guard is also at issue.

DEFINITIONS

Before proceeding, we need to define what we mean when we say "activated" or "activation" versus "deployed" or "deployment." For data-related reasons (see Section 3), we use the term "activated" throughout this document to refer generically to a state of serving on active duty as a reservist in support of the Global War on Terrorism and its specific contingencies (i.e., Operation Noble Eagle, Operation Enduring Freedom, and Operation Iraqi Freedom). An "activated" reservist may or may not be "deployed." For the purposes of this report, being "deployed" means serving outside the continental United States (OCONUS) in support of a Global War on Terrorism contingency. In most cases, "deployed" also means serving in an officially designated combat zone. Thus, in the context of the Global War on Terrorism, a reservist whose home base is in California and who is backfilling a military position in Georgia would be considered "activated" but not "deployed." For this report, we analyze the impact of reserve activations, regardless of whether activated reservists were deployed, since being activated means, in all likelihood, suspending work for a civilian employer. For regular active-duty personnel, being "deployed" means leaving one's active-duty base for military operations in a combat zone.

Finally, throughout this report, when we refer to the Reserves, we mean the Selected Reserve and the Individual Ready Reserve, which include both the Reserves and National Guard and the separate components within them (Army Reserve, Army National Guard, Air Force Reserve, Air National Guard, Navy Reserve, Marine Corps Reserve, and the Coast Guard Reserve) but exclude the Standby Reserve, Retired Reserve, and Inactive National Guard. Direct mobilizations from the Individual Ready Reserve have been relatively rare during the Global War on Terrorism, but these individuals are included in our data.

ORGANIZATION OF THIS REPORT

This report proceeds in five sections. The next section places our specific research questions in the broader context of the Global War on Terrorism and discusses why activations and deployments could have a negative impact on employment. Section 3 then describes our data and the methods we employ to analyze them. In Section 4, we present estimates derived from our econometric model of employment. We conclude in Section

Chapter Two

THE POLICY CONTEXT

In this section, we first provide descriptive statistics on the absolute magnitude of reserve activations and active-duty deployments during the Global War on Terrorism and their magnitude relative to total U.S. employment. We then consider the possible ways that activation and deployment might affect local employment.

ACTIVATIONS AND DEPLOYMENTS DURING THE GLOBAL WAR ON TERRORISM

By historical standards, the use of reserve forces since September 11, 2001, has been extraordinary (see Figure 2.1). During fiscal year 2004, reservists contributed approximately 63 million duty days in support of the Global War on Terrorism, which is five times the duty days provided in fiscal year 2000 and half again as large as the duty days provided during Operations Desert Shield/Desert Storm.

The duration of the average reserve activation has also been long by historical standards. Between September 2001 and December 2004, the average activation lasted eight months; moreover, this duration underestimates the true length of activations, since many activation spells had yet to be completed. About 21 percent of activated reservists (some 73,000 reservists) had been activated more than once since September 11, 2001.

As the figure shows, even before September 11, 2001, reserve activations were increasing steadily because DoD was increasingly relying on reserve forces for small-scale military operations and peacekeeping operations (e.g., operations in Haiti, Bosnia, Southwest Asia [SWA], and Kosovo). Still, all the evidence suggests that the events of September 11 and the subsequent scale of reserve mobilizations were unexpected. Thus, it is reasonable to assume that prior to September 11, employers and local communities did not expect their reserve members to be activated and deployed to the extent they have been. As we discuss later in this section and in Section 3, this assumption is important in interpreting the results of our econometric model.

Figure 2.2 shows the mean monthly number of active-duty and reserve personnel living in U.S. counties activated or deployed in support of the Global War on Terrorism between September 2001 and December 2004. The figure shows that the mean number of reserve personnel activated in support of Global War on Terrorism contingencies was moderate in 2001 and 2002 (33,000 and 62,000, respectively), reflecting the more limited use of the Reserves in Afghanistan and domestically for homeland defense. However, the mean number of reserve personnel activated increased sharply in 2003 and 2004 with Operation Iraqi Freedom and the subsequent, ongoing reconstruction and peacekeeping efforts in Iraq. The figure also shows the mean number of reserve personnel deployed in support of the Global War on Terrorism, which displays a similar time trend but is small relative to the number of activated personnel. The reserve forces are instrumental in operating and maintaining ongoing military operations, and many of those required functions (e.g., training, administrative processing, operating mobilization and demobilization facilities, staffing medical facilities, maintaining equipment, intelligence) are performed domestically. Additionally, reservists who deploy can spend several months training to deploy and undergoing demobilization exercises following deployment, and some reservists backfill for active-duty personnel deployed from domestic bases.

These aggregate figures on reserve activations suggest that the impact of activations on aggregate U.S. employment is likely to be very small. Over the time period covered by Figure 2.2, the U.S economy employed an average of 126 million persons in any given month. Thus, on average, activated reservists have represented a tiny percentage-between 0.03 percent in 2001 and 0.13 percent in 2004-of total U.S employment during the Global War on Terrorism. Moreover, not all activated reservists are employed in civilian occupations prior to being activated, and so each activated reservist does not necessarily represent an individual who would otherwise be employed in a civilian job.

However, reservists are not distributed proportionally to populations across the United States. Table 2.1 shows the distribution of the ratio of activated reservists to total employment at the county level between September 2001 and December 2004. The ratio of reserve activations to total employment varies by nearly an order of magnitude between the 25th and 75th percentiles of the overall distribution, although the overall magnitude of the ratio is generally quite small.

Reserve activations equal or exceed 1 percent of county employment in only slightly more than 1 percent of all county-month observations. As Table 2.1 shows, these counties are considerably smaller than other counties In fact, employment declines steadily as reserve activations as a fraction of employment increase (with the exception of counties with no reserve activations). Counties with activations totaling at least 1 percent of employment have an average employment of 3,655. This compares with median county employment of 8,147 and mean employment of 56,617 at the median value of the ratio of reserve activations to employment. Counties in which reserve activations constitute at least 1 percent of employment tend to persist in that state as well. Over the span of our data, these counties spent an average of 12 months in which reserve activations constituted at least 1 percent of employment.

(Continues...)

---

Excerpted from The Effect of Reserve Activations and Active-Duty Deployments on Local Employment During the Global War on Terrorism by David S. Loughran Jacob Alex Klerman Bogdan Savych Copyright © 2006 by RAND Corporation. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

---