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Income of Working-Age Veterans Receiving Disability Compensation

The Department of Veterans Affairs (VA) compensates veterans for medical conditions or injuries that occurred or worsened while they were on active duty in the military. In fiscal year 2022, VA spent $125 billion (in 2022 dollars) on disability payments for 5.3 million beneficiaries. By law, those payments are based on VA disability ratings that reflect, as much as practicable, the severity of veterans’ service-connected conditions and the average earnings they would be expected to lose as a result of those conditions.

For this report, the Congressional Budget Office compared the earnings, personal income, and household income of veterans who have a disability rating with those of veterans who do not have one. The agency’s analysis focused on differences between those groups for working-age men, ages 22 to 54, from 2017 to 2019. CBO found the following:

  • Male veterans who received VA disability compensation (including those who did not work) had average annual earnings of $52,200—16 percent less than the earnings of veterans without a VA disability rating. Median earnings (the midpoint value) of veterans with a rating were also less, by 12 percent. CBO did not adjust any of those calculations for demographic characteristics. Regression analysis, which accounts for such characteristics, indicates that veterans with a rating of 10 percent or 20 percent earned about the same as similar veterans with no rating; veterans with a rating of 30 percent to 60 percent earned slightly less; and veterans with a rating of 70 percent or more earned much less.
  • Annual earnings were substantially lower for veterans with a high disability rating, a finding driven in part by lower labor force participation among veterans with a high rating. For veterans who were not in the labor force, it is unclear whether poor health meant that they could not work, whether the extra income from VA allowed them to exit the labor force, or whether they left the work force for other reasons.
  • CBO also looked at the earnings of male veterans who were potential workers—those who were not students and did not report functional disabilities (medical conditions that cause substantial difficulty with physical or mental activities). Veterans in that group had the same general earnings patterns as all working-age veterans, but differences in earnings between those with and without a VA disability rating were smaller.
  • Overall, veterans with a disability rating who were potential workers had average annual earnings that were lower by $1,900, or 3 percent, than the earnings of those without a rating, and fewer of them were in the labor force. Median earnings, which are not skewed by extremely high or low values, yielded a different result, indicating that veterans with a rating typically earned 5 percent more than veterans without a rating. Regression analysis suggests, however, that veterans with a rating of 10 percent or 20 percent earned the same as veterans with no rating and similar demographic characteristics and that veterans with a higher rating earned less.
  • The average personal income (earnings plus other income) of all male veterans who received VA disability compensation was about 10 percent higher than that of veterans who did not, mainly because VA disability payments were greater, on average, than any differences in earnings. The annual household income of all veterans, regardless of disability status, was more than $100,000, on average.

Originally published at https://www.cbo.gov/publication/59380

- Part of VUGA -USA media group