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Veterans' Unemployment Remains Low—but It's Not All Good News

Two military doctors converse.

​New federal data shows that the unemployment rate for U.S. veterans was 2.7 percent in October, down from 3.6 percent in September and up from 2.5 percent in October 2022. Veterans boast a lower unemployment rate than their nonveteran peers.

However, many veterans are struggling to find jobs that employ, recognize and compensate them in line with their level of military experience, according to a new report by McKinsey & Company.

The report, published on Nov. 8, found that 90,500 of the 150,000 active-duty service members who transition from the military each year earn less in their first year after being discharged than they did on active duty—resulting in billions of dollars of lost economic value.

"Our findings put data behind many of the anecdotes we hear about the transition from military to civilian employment," said Scott Blackburn, senior partner at McKinsey's Washington, D.C., office. "As a monolith, veterans are doing relatively well. However, when you break veterans into segments, that is where we see differences."

Former officers, U.S. special forces personnel and specialists in intelligence, IT and cyber operations made more than 75 percent of their military compensation in 2022, the study indicated.

Conversely, former junior enlisted service members, on average, made less than 50 percent of their military compensation, and former noncommissioned officers made between 50 percent and 75 percent of their previous salary, the report noted.

Enlisted service members represent about 80 percent of military personnel, Blackburn explained, and many aren't required to have four-year degrees, putting them at an immediate disadvantage upon their discharge.

"Traditional hiring practices often overlook veterans who don't meet credentialing requirements, such as four-year degrees, forcing them to accept jobs for which they are overqualified relative to their experience," he said.

Brian Wheat, a project manager at payroll services company Paychex in Rochester, N.Y., who spent 20 years in the U.S. Army, says the reason veterans may earn less post-service than when in the military isn't necessarily because of a lack of qualifications or experience.

"Oftentimes, veterans prefer to take civilian positions that align with their values and lifestyle, which sometimes means taking entry-level positions and earning slightly less in their first year as they develop new skills and gain additional experience," he said.

Occupations Veterans Should Consider—and Avoid

The report showed that former service members who are "skilled through alternative routes," rather than college, tend to occupy lower-paying and more physically demanding roles, such as construction jobs, compared with veterans with bachelor's degrees.

Based on an assessment of veterans by RAND Corporation, former enlisted personnel were highly rated on occupational skills associated with trades such as electricians, mechanics and construction workers. They were also rated higher in technical skills, such as installation, equipment maintenance, repairing and troubleshooting, than in "softer" occupational skills associated with management, sales and office or administrative support roles, such as reading comprehension, persuasion and negotiation.

"This suggests there are real or perceived deficiencies in the interpersonal skills that are often seen critical to succeed in business settings," Blackburn said.

The study also found that occupations that employ veterans are expected to experience strong job growth and low change-of-work activities despite the rise of artificial intelligence (AI). These fields include:

  • Nursing.
  • Freight, stock and material moving.
  • Construction.
  • Truck driving.

Meanwhile, jobs that employ veterans that are at risk of displacement due to declining job demand and the rise of AI include retail salespeople, supervisors of office and administrative support workers, and customer service representatives.

"Transitioning veterans can consider avoiding these roles, and veterans already in these occupations can continue to focus on upskilling, while taking advantage of reskilling opportunities to move into more secure occupations," the McKinsey report said.

HR Takeaways

As the U.S. continues to experience a shortage of skilled labor, employers can help close this talent gap by recognizing the value of veterans to their workforce and embracing a skills-based approach to hiring, Blackburn said.

"This includes assessing candidates based on their holistic skill set beyond just industry experience or specific educational credentials," he said.

To expand opportunities for veterans, Blackburn urged HR leaders to:

  • Assess where their organization is sufficient and lacking in key skills.
  • Build internal capabilities and tools to power skills-based hiring, which he said "can include using AI to find adjacent skill pools for in-demand roles."
  • Define an assessment approach that matches candidates to the skills that are critical to be successful in the role.

"Companies can open their hiring practices to consider veterans for a variety of roles, not just those that match perfectly with their military skills," the report concluded. "Together, these actions can add billions in value to the U.S. economy as veterans moving into civilian jobs maintain or increase their earning power to support their families and build their communities."


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