Self-Employment in the Veteran 

and Service-Disabled Veteran Population

Open Blue Solutions, Chapel Hill, NC 27517

2007 [43 pages]. Under contract no. SBAHQ-05-Q-0009

Purpose

The factors that influence lower rates of self-employment among the service-disabled veteran population 

are not well-understood, in part because servicedisabled veterans are seldom identified as a distinct 

group when studies of veteran entrepreneurship are 

performed. This study uses the Bureau of Labor 

Statistics’ Current Population Survey (CPS) to examine the self-employment choices of veterans and service-disabled veterans.

This study also examines how computer technology relates to veteran self-employment. A deeper 

understanding of this interaction is required in order 

to assist veterans with the successful development 

of their own businesses. It is especially important 

that policymakers understand the effect that information-age tools like the Internet have had on the selfemployment choices of service-disabled veterans, 

whose numbers are growing. This paper provides 

information about veteran entrepreneurship and illustrates the experiences of self-employed veterans in 

the information-based economy. 

Data collected in the Census Bureau’s 2002 

Survey of Business Owners and Self-Employed 

Individuals (SBO), part of its Economic Census 

conducted every five years, indicate that 7.2 percent 

of non-employer, veteran business owner respondents were service-disabled. The Department of 

Veterans Affairs (VA) reported that in the same year 

9.4 percent of all veterans were receiving compensation due to a service-connected disability. The VA’s 

2001 National Survey of Veterans reported that 13.8 

percent of veterans identified themselves as having 

a service-related disability (though not necessarily 

receiving compensation). So, using “non-employers” as a proxy for self-employed individuals, it 

can be said that service-disabled veterans are selfemployed at a rate approximately one-quarter to 

one-half lower than their percentage in the veteran 

population in general would otherwise suggest.

Overall Findings

• Veterans with service-connected disabilities are 

self-employed at lower rates than veterans without 

such disabilities. Substantially all of the difference 

between the self-employment rates of service-disabled veterans and those of other veterans results 

from the service-connected disabilities themselves, 

and not to differences in demographic or other characteristics. 

• Approximately one-half to two-thirds of the difference in these self-employment rates is due to service-disabled veterans not working at all. Controlling 

for the effects of service-connected disabilities 

results in nearly identical rates of labor-force participation among service-disabled veterans and those 

without such disabilities.

• Computer use is correlated with higher employment rates among all veterans, with additional benefits for the service-disabled. Computer use also 

increases self-employment rates among all veterans, 

but there is no additional effect on the self-employment choices of service-disabled veterans beyond 

that observed for all veterans.

January 2007 No. 291

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information

and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not 

necessarily reflect the views of the Office of Advocacy.
Highlights

• During the eighteen years observed (1988-

2005), there has been a steady increase in the percentage of veterans not employed, which is potentially due to an overall aging of the veterans population.

• Self-employment rates are lower for service-disabled veterans than for non-service-disabled veterans 

in all years and in both disability definitions used for 

this study.

• The study’s models predict that the employment rate of service-disabled veterans would be over 

ten percentage points higher if service-connected 

disabilities did not interfere with employment. This 

would represent a 25 to 28 percent increase in their 

employment rate. 

• These models further predict that the selfemployment rate of service-disabled veterans would 

increase by about three percentage points if their disabilities were not a barrier. This would represent a 60 

to 90 percent increase in their self-employment rate, 

depending on the model.

• The study’s analysis predicts that, if all service-disabled veterans were computer owners, their 

employment rate would increase by over five percentage points, representing about an 11 percent 

increase in that rate.

• The study’s models also predict that the selfemployment rate of service-disabled veterans would 

increase by slightly more than one percentage point 

if all such veterans were computer owners, representing about a 23 percent increase in the self-employment rate. 

Scope and methodology

Data for this study were drawn from three sections 

of the Current Population Survey (CPS) conducted 

by the U.S. Census Bureau for the Department of 

Labor’s Bureau of Labor Statistics between 1985 

and 2005. These included the CPS’s annual March 

demographic supplements, its biennial Veterans 

Supplements, and its Computer and Internet Use 

Supplement from 2001. Datasets were created for 

each survey month in which data was drawn. SAS 

programs developed by the National Bureau of 

Economic Research were used to assemble the raw 

CPS data. In order to fill gaps in the available SAS 

extraction programs and to account for year-to-year 

differences in the structure of the datasets, the authors 

developed their own data extraction program for the 

March 1995 data and for survey years prior to 1988. 

Tabulations and summary statistics are presented 

that identify the effects of particular factors, such as 

demographic variables (including age, gender, and 

race/ethnicity) and service-connected disability, on 

the propensity for veterans to become self-employed. 

The results are presented by implementing a bivariate probit model of veteran self-employment, in 

which the veteran makes a two-stage choice between 

employment and not working, and then between selfemployment and other employment if employment is 

chosen in the first stage. The model provides formal 

hypothesis tests for the statistical significance of the 

factors tabulated. The research conducts simulations 

and provides estimates of the practical significance 

of the effects of service-connected disabilities on the 

self-employment outcomes of veterans. 

This report was peer-reviewed consistent with 

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting 

the Director of Economic Research at advocacy@

sba.gov or (202) 205-6533.

Ordering Information

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