How Do Reserve Call-Ups Affect Civilian Employers?

In a new report, the Congressional Budget Office attempts to answer this question. Here are its main findings:

The Effects of Reserve Call-Ups on Civilian Employers

CBO’s analysis revealed that most employers are unaffected by the activation of reservists. Only about 6 percent of business establishments employ reservists, and fewer than half a percent of self-employed people are in the reserves. Among firms with reservist employees and owners, substantial variation is seen in their ability to adjust to a reservist’s call-up. Activations create vacancies that firms would not otherwise have had. Some businesses may absorb the loss of personnel at little cost, but others may experience slowdowns in production, lost sales, or additional expenses as they attempt to compensate for a reservist’s absence. A smaller number yet may find that they are unable to operate for lengthy periods—or at all—without their reservist and may experience financial losses or insolvency. Such problems are likely to be more severe for:

  • Small businesses that lose essential (key) employees;
  • Businesses that require workers with highly specialized skills; and
  • Self-employed reservists.

Small businesses (generally those with fewer than 100 employees) employ about 18 percent of all reservists who hold civilian jobs; businesses with fewer than 500 employees and self-employed reservists employ about 35 percent. But there are no precise data on the number of reservists who are key employees or who have highly specialized skills. On the basis of survey information about reservists̢۪ civilian occupations, CBO estimates that out of the 860,000 reservists in the Selected Reserves (the primary source of reserve personnel), between 8,000 and 30,000 of them probably hold key positions in small businesses. In addition, about 55,000 reservists are selfemployed. Considering that snapshot of reservists̢۪ employment, CBO expects that as many as 30,000 small businesses (0.6 percent of all such firms) and 55,000 self-employed individuals (less than 0.5 percent of the selfemployed) may be more severely affected than other reservist employers if their reservist employee or owner is activated.

In addition, CBO found that although USERRA provided employment protections to reservist employees, it might be exacerbating the difficulties that call-ups present for those individuals̢۪ employers. The legislation limits firms̢۪ flexibility in avoiding vacancies and imposes additional costs on some employers.

The report notes that parts of the data are limited, so the conclusion may not apply to certain employers. But it’s a decent first-cut assessment of a complicated topic.

FILED UNDER: Economics and Business, Military Affairs
Robert Garcia Tagorda
About Robert Garcia Tagorda
Robert blogged prolifically at OTB from November 2004 to August 2005, when career demands took him in a different direction. He graduated summa cum laude from Claremont McKenna College with a Bachelor of Arts in Philosophy, Politics, and Economics and earned his Master in Public Policy from Harvard's Kennedy School of Government.