Income and Net Worth of Veteran Business Owners over the Business Cycle, 1989–2010

George Haynes, November 2014


Veterans constitute a vital part of the nation’s population and business sector. Their economic success is a national priority and a key objective of government efforts to expand small business and entrepreneurship opportunities. The recent recession challenged all businesses. While there has been ample discussion of the growth and decline of businesses during the economic cycles of the past 30 years, knowledge of the experience of business owners (at either the individual or household level) is lacking.

This study focuses on the changing financial health of veterans during recent economic cycles. It examines the changes from 1989 to 2010, a period covering several economic expansions and contractions, for all veteran and non-veteran households and for those owning small businesses.

The 21-year period from 1989 to 2010 is one of extremes. The 1990s were marked by the largest ever peacetime expansion in the U.S. economy, while the U.S. economy experienced its most substantial decline since the Great Depression from 2007 to 2009. This rapid expansion and subsequent rapid contraction has raised a key question for decision makers and policy officials concerned with the well-being of veteran business owners and entrepreneurs: How have these expansions and contractions affected the financial well-being of veteran households with small businesses? This study utilizes data from the Federal Reserve Board’s Surveys of Consumer Finance (SCF) from 1989 through 2010 to evaluate financial health in terms of changes in income and net worth for veterans and non-veterans. It updates a previous investigation of veteran household income and net worth done in 2007 for the Office of Advocacy.


Veteran business owners and entrepreneurs make important contributions to business creation and growth in the American economy. Their active duty and reserve service often provide them with important skills and leadership qualities that are directly relevant to business ownership. While veterans comprise an important segment of the nation’s population and economy, veteran households have actually become a substantially smaller percentage of all U.S. households (and small business–owning households) over the past two decades. The percentage of veteran households declined from 30.7 percent in 1989 to 19.5 percent in 2010. The number of veteran households with small business ownership declined by over 28 percent, or 1.1 million households, over this period. This decline is largely due to the aging of the veteran population and the fact that the population age 65 and over has increased at a faster rate than the overall population between 2000 and 2010.

The general economic expansion of the 1990s had an uneven impact on the net worth of households, dramatically increasing the net worth of some, leaving others with more modest increases, and decreasing the net worth of others. The Great Recession in the late 2000s dramatically decreased the net worth of many households while leaving some relatively unscathed.

Drawing on data from the SCF from 1989 through 2010, the study uses both descriptive analysis and analytic models to describe changes in the financial well-being of veterans and non-veterans over this period as well as to identify the key factors affecting their relative well-being.

Overall Findings

The most striking finding of this study is that veteran small business owners fared better financially than veterans not owning a small business. This was the case even though the general impact of the business cycles from 1989 to 2010 on veteran and non-veteran small business owners was very similar—i.e., both groups experienced very similar cyclical changes in income and net worth from 1989 to 2010.

Also of note are the findings of the regression analysis which controls for such demographic variables as age and education. The regression analysis found that veteran households generally had lower income than non-veteran households, and veteran small business households had lower wealth than non-veteran small business households. Most importantly in the 21-year-period studied, there were no substantial changes (neither increases nor decreases) in the differences in income and wealth among the three groups studied: veteran and non-veteran households, veteran households with and without small businesses, and business households headed by veterans and non-veterans.

Findings on Income and Wealth. Specific findings on financial well-being include the following:

  • Veteran households were less likely to be classified as high income and more likely to have lower mean income than non-veteran households. The percentage of non-veteran households with high income increased from nearly 20 percent in 1989 to over 26 percent in 2010, while the share of high-income veteran households declined from 36 percent to under 32 percent.
  • The share of veteran small business households with high income declined by 8 percent, while increasing 12 percent for all veteran households. The share of veteran small business households with high wealth increased by 67 percent, while increasing at a slower rate—23 percent—for all veteran households.
  • Veteran and non-veteran small business owners realized significant declines in mean income during the severe contraction between 2007 and 2010 (Figure 1).
  • Significant increases were seen in the share of veteran and non-veteran small business households having high net worth. Both sets of households realized very similar (and significant) increases of over 60 percent. The regression analysis suggests that veteran small business households had significantly lower net worth than non-veteran small business households.
  • Veteran small business households realized a significant increase in mean net worth during the 1998-2001 expansion (Figure 2). Non-veteran small business households realized significant increases in mean net worth during the 1995-2001 expansion and significant decreases during the Great Recession.

Demographic and Business Characteristics. Findings on the descriptive demographic and business characteristics of households include the following:

  • From 1989 to 2010, the number of veteran households declined from 28.6 million to 22.9 million, while non-veteran households rose from 64.5 million to 94.7 million—an increase of 46.8 percent for non-veteran households compared to a decline of 19.9 percent for veteran households.
  • The number of veteran households with small business owners decreased by over 28 percent, or 1.1 million households, while aggregate income for veteran small business households decreased by over 36 percent from 1989 to 2010.
  • In the most recent year studied (2010), veteran household heads were older, and more likely to be white, male, and married than non-veteran household heads.
  • Veteran heads of households with small businesses were somewhat older than their non-veteran counterparts in 1989 and 2010.
  • Compared to their non-veteran peers, veteran small business households had a higher share of income in Social Security and pensions (25.2 percent versus 7.6 percent) and lower shares of income in wages and salaries (40 percent versus 48.5 percent) and business, farm, and rental income (27.8 percent versus 36.6 percent).

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