I don't know if you can do it, but if you can I can't find how
You should be able to upgrade military units to the next tier (Recruit=>Militia=>Soldier) for a discount against recruiting them a fresh. Otherwise you have low level military units tying up your Settler total (unless you send them on a suicide mission, of course). After all, these units are "veterans" so they should be upgradable to something more potent for less than a raw recruit. (Still same resource types, but less of them - say 8 iron instead of 10 or something like that)