The effects of military service on future earnings in the civilian labor market

What is it about?

Military service, in many instances, has been found to have negative effects on future earnings, due to the loss of civilian labor market experience while in service. It, however, can benefit veterans in that they might gain skills that turn out to be useful in the labor market, or they might gain access to better jobs through networking. This study finds that the net effect of service is positive, but that effect is not due to skills gained during service, but rather is more likely due to networking--which is a specially true scenario for a small country like Israel.

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Why is it important?

The use of natural experiments, induced by peculiarities in the Israeli law and its implementation, renders the estimation of effects consistent and accurate. The net positive effect, for all categories of workers, is large and clear, in contrast to many studies in this literature. Finally, the channel through which these effects materialize is proved to have nothing to do with skills gained during service; it is hypothesized that the whole effect comes through networking--aka social capital.

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