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OL NAVAL POSTGRADUATE SCHOOL Monterey, California CIVILIAN EARNINGS OF NON-RETIREE OFFICERS by Hsieh, Tsu-Sung September, 1991 Thesis Advisor: Stephen L. Mehay Approved for public release; distribution is unlimited. T25786A Unclassified Security Classification of this page REPORT DOCUMENTATION PAGE UNCLASSIFIED la Report Security Classification lb Restrictive Markings 2a Security Classification Authority 3 Distribution Availability of Report 2b Declassification/Downgrading Schedule Approved forpublic release; distribution is unlimited. 4 Performing Organization Report Number(s) 5 Monitoring Organization Report Number(s) 6a Name ofPerforming Organization 6b Office Symbol 7a Name of Monitoring Organization Naval Postgraduate School (IfApplicable) Naval Postgraduate School AS/36 6c Address (city,state, andZIPcode) 7b Address(city, state, andZIPcode) Monterey, CA 93943-5000 Monterey, CA 93943-5000 8a Name of Funding/Sponsoring Organization 8b Office Symbol 9 Procurement Instrument Identification Number (IfApplicable) 8c Address (city, state, andZIPcode) 1 SourceofFunding Numbers ProgramElementNumber ProjectNo TaskNo WorkUnitAccessionNo CIVILIAN EARNINGS OF NON-RETIREE OFFICERS 11 Title(IncludeSecurityClassification) 12 Personal Author(s) Hsieh, Tsu-Sung 13a Type of Report 13b TimeCovered 14 Date ofReport (year, month,day) 15 Page Count Master's thesis From To 1991, September 168 16 SupplementaryNotation The views expressed in this paper are those ofthe author and do not reflect the official policy orposition ofthe Department ofDefense or the U.S. Government. 17 Cosati Codes 18 Subject Terms (continue on reverse ifnecessary and identify by block number) Field Group Subgroup Veterans; post-service earnings; human capital; earnings functions 19 Abstract (continue on reverse ifnecessary and identify by block number This thesis looks at the post-service civilian earnings ofnon-retiree military officers. For this purpose, a data base was created using the 1986 DoD Reserve Components Survey. Log-earnings equations were estimated to measure the effect of(1) veteran status, (2) skill transferability, and (3) commissioning source. Empirical analyses were conducted using samples ofofficers categorized by race and gender. Age-earnings graphs were used to help explain differences in income between various groups ofnon- retiree officers and theircivilian counterparts. The results indicate that non-retiree officers have, on average, higher incomes than their civilian counterparts. Although Navy officers earn the highest premium, Army officers earn less than theircivilian counterparts. Male non-retiree officers have higher incomes than female non-retiree officers. White non-retiree officers exhibit increasing income growth rates while nonwhite non-retiree officers reveal no consistent growth pattern. Skill transferability yields a 10-percent earnings premium. Finally, military academy graduates were found to earn 17.3 percent more income than theircivilian counterparts. 20 Distribution/Availability of Abstract 21 Abstract Security Classification |X| unclassified/unlimited same as report DTICusers Unclassified 22a Name of Responsible Individual 22b Telephone(IncludeAreacode) 22c Office Symbol S. L. Mehay (408) 646-2643 AS/Mp DDFORM 1473, 84 MAR 83 APR editionmaybe used until exhausted security classification of this page All other editions are obsolete Unclassified i Approved for public release; distribution is unlimited. Civilian Earnings of Non-Retiree Officers by Hsieh, Tsu-Sung Lieutenant, Republic of China Navy B.S., Republic of China Naval Academy Submitted in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE IN MANAGEMENT from the NAVAL POSTGRADUATE SCHOOL September 1991 ABSTRACT This thesis looks at the post-service civilian earnings of non-retiree military officers. For this purpose, a data base was created using the 1986 DoD Reserve Components Survey . Log-earnings equations were estimated to measure the effect of (1) veteran status, (2) skill transferability, and (3) commissioning source. Empirical analyses were conducted using samples of officers categorized by race and gender. Age-earnings graphs were used to help explain differences in income between various groups of non-retiree officers and their civilian counterparts. The results indicate that non-retiree officers have, on average, higher incomes than their civilian counterparts. Although Navy officers earn the highest premium, Army officers earn less than their civilian counterparts. Male non-retiree officers have higher incomes than female non-retiree officers. White non-retiree officers exhibit increasing income growth rates while nonwhite non-retiree officers reveal no consistent growth pattern. Skill transferability yields a 10-percent earnings premium. Finally, military academy graduates were found to earn 17.3 percent more income than their civilian counterparts. in TABLE OF CONTENTS INTRODUCTION I. 1 BACKGROUND A. 1 B. OBJECTIVES 1 THE RESEARCH QUESTION C. 1 D. SCOPE, LIMITATIONS AND ASSUMPTIONS 2 II. LITERATURE REVIEW 3 FRAMEWORK A. 3 B. HUMAN CAPITAL THEORY 4 DATA AND METHODOLOGY III. 7 DATA A. 7 METHODOLOGY B. 8 IV. EMPIRICAL ANALYSIS 14 A. DESCRIPTIVE STATISTICS 14 1. Full sample 14 2. Comparisons by Veteran Status 15 3. Comparisons by Race 16 4. Comparisons by Gender 16 IV