-By Stan V. Smith, PhD with Kyle Lauterhahn

Assessing the partial loss when an injured plaintiff can still continue to work in the future in “some reduced capacity” presents a complex challenge to plaintiff attorneys and to juries, a challenge that is often not well addressed in a litigation setting.  However, there are high-quality statistics produced by the United States Census Bureau that few expert economists, and even fewer lawyers, are aware of that can greatly aid in the analysis of lost earnings capacity. These government statistics allow an economist to provide an opinion to a jury regarding the partial loss of earnings capacity due to disability to a reasonable degree of economic certainty, obviating the need in many instances for a formal vocational analysis.

When an injured person returns to work, the rate of pay and the hours worked can be very misleading as they are frequently not indicative of the long-run impacts. Even if an injured person is back to work at the same job and the same rate of pay, with a disability, there are definite wage losses due to disability in the long-term future that are not readily evident and that should not be ignored. Fortunately, these Census Bureau statistics address and remedy the problem.

The partial loss of earning capacity can arise not only from physical injuries, it can also arise in a myriad of situations such as defamation that has a future career impact. The loss may arise if someone’s career in medical school, for example, is prematurely terminated by wrongful dismissal. An economist can measure such loss. This article focuses on ways to help juries understand the long-term impact on earning capacity loss due to a physical or mental impairment, such as difficulty standing, or difficulty concentrating, where government statistics provide a high-quality measure of the impact, both on employment probabilities and pay rates.  This long-term impact is typically not evident shortly after the injury.

EXAMPLES OF PARTIAL LOSS CIRCUMSTANCES

After an injury, an individual may have already returned to work full-time, but he or she may be earning less than prior to their injury due to impairment. For example, a realtor who has difficulty walking or has back pain may work full-time after the injury but accomplish less per hour.

They may show fewer homes in a given afternoon due to difficulty walking, driving, and going up and down stairs, and thus earn less in commissions.  In addition, they may also work fewer hours per week due to the disability, and earn even less per year than if they worked full-time.  Furthermore, the degenerative impact of the injury on hours and earnings may increase over time.

A construction worker may continue to work full-time with some pain. Even if the worker earns the same union wage per hour, he or she may work less overtime in the long run, and may be able to work only to age 53 for example, rather than perhaps age 62 or 65, or even later.  The work life capacity prior to the disabling injury is forever impacted.  Less overtime and fewer years of work in the future reduce the injured person’s earnings capacity.

An accountant may be forced to retire early, giving up the business that took decades to build. A call center worker may choose to work less overtime due to fatigue, and he or she may take frequent personal leave as a body pain may flare up from time to time. Pain can be very debilitating. A truck driver may find that upon their return to work, pain associated with long-haul driving may force them to also accept shorter, lower-paying routes, leading to a double penalty of reduction in earnings and time worked.

UNITED STATES CENSUS BUREAU DATA

These long-term, future impacts of impairments are all but impossible to assess after the injury without the high-quality statistics that are available to measure them.  Even if an individual has not yet returned to work, but is making medical progress and return to work is feasible, a jury will want to understand what the person can do in the future, and how their capacity may be reduced in the long run.

As shown in the examples above, the average person who has a disability due to injury also has a significantly reduced probability of employment, and perhaps a significantly reduced pay rate. This reduction in employment can mean fewer years worked in one’s career (i.e. retiring early) or fewer hours worked in each year (i.e. shorter work week, more time off, etc.). The reduction in pay rate can result from reduced hourly earnings, reduced overtime, or reduced opportunities for promotion and advancement, all of which lead to significant losses for an injured person.  The reduction in employment and the reduction in pay rate can operate independently of one another.

We know that these losses exist anecdotally, such as in the examples above, but there are also reliable statistical databases for these work and pay reductions due to disabling injuries.  The United States Census Bureau collects employment and pay data on Americans with disabilities as part of its regular surveys.  Persons with disabling injuries may be compared to the total population in order to get a statistical comparison of the reduction in probability of employment or the median earnings of a disabled person, as compared to the average person in the workforce. This data indicates that people who have disabilities, unsurprisingly, have reduced likelihood of employment and reduced earnings (if they are employed) compared to the average American.

The Census Bureau has a breakdown of impact by disabling condition, which can be related to injured individuals to show what degree of future earning reduction is statistically expected. Independent measures of loss can be found for many types of disabilities including: difficulty seeing, hearing, concentrating, getting along with others, speaking, walking, lifting, grasping, standing, sitting, crouching, reaching, moving heavy objects, or coping with stress.  Disability is also indicated by the use of wheelchair or a walker, and by limitations in the basic activities of daily living, such as homemaking, dressing or bathing, or by limitations of the more complex or instrumental activities of daily living such as managing finances and planning meals.

REAL NUMBERS

For someone with difficulty sitting due to a spine injury, according to the Census Bureau statistics, the probability of employment is approximately 58.25 percent less than that of the total population. An assumed 58.25 percent reduction in future work can be applied to the expected normal future earnings of the person. If a long haul truck driver earning $70,000 per year would have worked for another 21.5 years but for their injury, their near 60 percent reduction in expected future years worked can mean 12.5 years of lost earnings, a loss of over a million dollars including benefits. This large loss is not otherwise evident to the jury if the driver has returned to work currently driving the same route and hours and at the same pay.  But government statistics can allow an economist to opine as to this future loss with a reasonable degree of economic certainty.

For persons who are employed subsequent to an injury that results in a disability, the data from the Census Bureau shows that the rate of pay or earnings per hour work is also likely to be reduced. In the instance of the realtor discussed above, the average earnings for someone who works despite difficulty walking are 66 percent of the earnings of an average American.  So if we assume that a realtor earning was capable of earning $60,000 per year prior to their injury, their long term post-injury earnings capacity may be expected to be only $40,000.  At an annual reduction of $20,000 in earnings, a young realtor may lose over half a million dollars in the future over their career.

In the instance of a child injury this data is particularly useful. While a child would not have yet established any career path, the impact of disability on an injured child can be also shown based on statistical reductions. If a child has been injured resulting in a mild traumatic brain injury and has difficulty concentrating, that child may yet graduate college, with very significant effort.  But difficulty concentrating will impair career prospects and earnings; such disabled people earn only 43 percent of the average, non-injured population. This 57 percent impact can be applied to future earnings of the injured child.  While the present value of a healthy child’s future earnings (assuming they graduate college) including benefits could approach $4 million, the child who has difficulty concentrating can expect a reduction in earnings that well exceeds $2 million.

In addition to the income capacity of a child being reduced, the prospective level of educational attainment of a child is likely to be reduced as well with a disability. We frequently assume several pre-injury educational outcomes, such as some college and college graduation. It may be that someone we thought had a great likelihood of completing college may now likely only complete some college, or may not even go to college at all. The jury can be shown all the possible combinations of equal and or lesser education due to the injury, with the post-injury wages and employment reduced by the Census Bureau employment statistics. So we can, for example, assume some college prior to injury and only high school after the injury. The post-injury high school earnings would be reduced based on the Census Bureau statistics.

Sometimes there is a vocational assessment of the reduced wages or employment.  But these assessments are not based on, nor supported by, the U.S. Census Bureau statistics. An economist, however, can provide a strong statistical basis for the employment and pay impact on earnings capacity and career, and show the jury an evidence-based reduction in loss of future earnings and capacity.

CONCLUSION – A BETTER EDUCATED JURY

Assessing the partial loss of earnings capacity due to a disability presents a complex court challenge for plaintiff attorneys and for the juries.  Statistics produced by the Census Bureau can establish a solid and credible foundation for estimating those losses.  An economist, can provide opinions regarding the partial disability to a reasonable degree of economic certainty.  Without such testimony, there is a likelihood of a jury “guessing” which can lead to “unpredictable” jury verdicts, either much higher or much lower than might result through a better-informed jury.  This high variability can undermine the jury system which the Seventh Amendment established.  With credible economic testimony based on Census Bureau statistics, the jury system is better supported.  There may be more predictable jury verdicts (and, hence more settlements.)  We are all well-served by these real number results.

Stan V. Smith, Ph.D., is VLM’s Quarterly Economics Columnist and president of Smith Economics Group, Ltd., headquartered in Chicago.  Trained at the University of Chicago (one of the world’s pre-eminent institutions for the study of economics and the home of the law and economics movement), Smith has also taught at the university and co-authored the first textbook on the subject of economic damages.  A nationally-renowned expert in economics who has testified nationwide in personal injury, wrongful death and commercial damages cases, Smith has assisted thousands of law firms in successful results for both plaintiffs and defendants, including the U.S. Department of Justice. To that end, Smith also developed the first course in forensic economics at DePaul University, and pioneered the concept of “hedonic damages,” testifying about the topic in landmark cases.  His work has been featured in the ABA Journal, National Law Journal, and on the front page of The Wall Street Journal.  Kyle Lauterhahn is a Senior Economic Analyst at Smith Economics Group in Chicago. Smith Economics Group, Ltd., is located at 1165 N. Clark Street, Suite 600, Chicago, IL, 60610. Dr. Smith may be reached at 312-943-1551, and at Stan@SmithEconomics.com.

The Firm, P.C. is a boutique Las Vegas law firm founded by Preston Rezaee, Esq. Preston Rezaee is also the founder and Editor in Chief of Vegas Legal Magazine.