Personal injury matters range from orthopedic injuries with a defined recovery to permanent impairments that end a career. The economic claim is built from the injured person's earnings history, the work the injury has taken away or reduced, the fringe benefits that came with that work, the household work the person can no longer do, and the cost of the future care the treating providers or a life care plan have identified. The economist's job is to state each of those components, tie it to the record, and reduce the future stream to a present value the court can use.
In short
The claim typically consists of past lost earnings from the date of injury to the date of analysis, future lost earnings or reduced earning capacity across the person's expected worklife, lost fringe benefits such as employer retirement contributions and health insurance, the replacement cost of household services the person can no longer perform, and the present value of future medical and care costs when a life care plan or treating recommendations exist. The records that drive the number are tax returns, W-2s and pay stubs, personnel and union files, benefit plan documents, and the medical or work-capacity opinions that define what the person can do after the injury.
Which component dominates depends on the person's age, occupation, and residual capacity. For a young worker who can no longer perform a skilled trade, future earnings loss over a long worklife usually outweighs everything else. For a person who returns to work at reduced hours or lower pay, the loss is the gap between the but-for path and the post-injury path, and the size of that gap is the contested question. Where a life care plan exists, its present value is often the largest single figure in the report, and household services losses can be substantial when the injured person did most of the home's unpaid work.
The economist establishes the but-for earnings base from the earnings history and, for a person early in a career, from occupational earnings data for the path they were on. That base is projected over a statistically expected worklife with wage growth, then compared with a post-injury path drawn from actual post-injury earnings or from the work-capacity opinions in the record. Fringe benefits are valued from plan documents or published employer cost data, household services from time-use data and local replacement rates, and future care from the life care plan priced item by item with medical cost growth. Every future stream is discounted to present value with the rate assumption stated, and contested assumptions are shown as sensitivity ranges so counsel and the fact finder can see what moves the number.
Stage-by-stage guidance on working with a forensic economist in personal injury litigation.
When the injury has removed the person from work for more than a short period, changed what they can earn, created ongoing care costs, or ended their ability to do household work. If the only claim is a few weeks of documented lost pay, counsel can often present it from the pay records alone. Once the loss runs into the future, the projection, growth, and present value questions call for an economic analysis.
Several years of tax returns, W-2s or 1099s, recent pay stubs, the employer's personnel file and benefit summaries, union or pension records, and the medical opinions or work-capacity findings that describe what the person can do now. For self-employed claimants, business tax returns and financial statements replace the wage records.
Lost earnings measure what the person has actually not been paid. Earning capacity measures what the person could reasonably have earned along the path they were on compared with what they can earn now, even if they are working. The economist models both paths and reports the difference, stating the basis for each path.
No. The life care plan is prepared by a medical or rehabilitation professional and lists the future care items, their frequency, and their unit cost. The economist takes that document as an input, applies medical cost growth over the plan horizon, and reduces the stream to present value. The economist does not opine on what care is needed.
The post-injury earnings become the mitigation path. The economist compares them with the but-for projection year by year, accounts for any lost benefits or reduced advancement, and reports the remaining gap. A return to work reduces the claim; it does not eliminate it if the new path pays less or is less secure.
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