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Lost Earnings - Permanent Disability


Many surveys conducted by U.S. government agencies attempt to measure the impact of a permanent work disability by asking whether the respondent has a physical or mental limitation in the kind or amount of work he or she can perform.  When answered positively, these surveys universally demonstrate that the average respondent:

  1. is less likely to be employed, and
  2. earns less when working year-around, full-time than his counterparts without a disability.

These findings are consistent, even when controlling for education and job classification.  Vocational Economics, Inc. is recognized for its pioneering work in use of governmental disability statistics to measure the lifetime loss of earning capacity due to permanent, partial disability.  (Vocational Econometrics, Inc., a sister company, publishes The New Worklife Expectancy Tables, adjusting the future worklife by level of work disability.)

Personal injury, medical malpractice, product liability, and many other circumstances might leave a plaintiff with a permanent limitation in the kind or amount of work he or she can perform.  If this is true, a loss of earning capacity is likely.

Our experts work with medical expert reports, depositions of all relevant parties, and an interview with the plaintiff or his or her family (where possible) to determine if a permanent work disability exists.  If so, the severity of the disability is ascertained, with its impact on the plaintiff's future earnings stream, and the loss (if any) is quantified.  Earnings records (W-2's, tax returns, pay stubs, etc.) are reviewed to determine historical earnings and their relationship to expected lifetime earning capacity.

As an example, a 40-year-old male with a high school degree, who is shown to have a not-severe work disability as a result of an accident might have analyzed lost future earnings as shown in the table below.  Note that this plaintiff's future post-injury earnings suffer in comparison to pre-injury in two components:  annual earning capacity and worklife expectancy.  This is consistent with the government research noted above for a typical person with a permanent work disability.

  Pre-Injury Post-Injury
Earning Capacity 38,320 33,976
Fringe Benefits 22% 22%
    Annual Compensation 46,750 41,451
Worklife Expectancy 22.1 16.2
    Lifetime Earnings 1,033,175 671,506
    Loss

361,669

For more details on the analysis process and the expert options offered by Vocational Economics, see Vocational Economic Analyses.

Some other considerations for analysis include:

  • What if the plaintiff was a child who had not yet established an earnings history at the time of disability?  Or, what if the plaintiff was working, but had not yet reached his or her full earnings potential (perhaps a recent college graduate)?  The Use of Proxies page addresses these special concerns.
  • Supplementary Analyses contains a description of other analyses commonly sought by customers to complement a loss of earnings analysis.

Last Modified:  March 16, 2006

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