Lost earnings project a documented earnings history; lost earning capacity measures a reduced ability to earn when the history understates what was possible.
The wages and benefits actually not received because of the event, measured from the person's own earnings history: pay records, tax returns, and employer statements, from the event to the return to work or to the end of the projection.
The reduction in the ability to earn, whether or not that ability was fully used before the event. It applies when the pre-event history understates what the person could have earned, or when the injury forecloses work the person had not yet begun.
| Dimension | Lost Earnings | Lost Earning Capacity |
|---|---|---|
| Measure | Actual earnings history projected forward | Capacity to earn, from education, training, and market data |
| Best evidence | Tax returns, W-2 forms, pay stubs | Occupational wage data, education, documented career path, vocational findings |
| Typical claimant | Established worker with a stable history | Student, homemaker, underemployed worker, business owner, worker between jobs |
| Contested point | Growth rate, horizon, post-event earnings | Whether the capacity was real and would have been used |
| Other experts | Often only the medical evidence | Vocational and medical opinions on capacity |
Lost earnings is the baseline measure whenever the person had a stable job and a documented history. The earnings projection starts from the records, carries them forward with wage growth over the worklife, adds benefits, and nets post-event earnings.
Lost earning capacity is the measure when the history does not describe the loss: a student whose career had not started, a parent who had left the labor force and intended to return, a worker who was between jobs or underemployed, or a person whose injury forecloses a documented path to higher-paying work. The projection is built from education, training, and occupational earnings data rather than from pay stubs alone.
Both measures produce a but-for earnings stream and a post-event earnings stream and take the difference. The distinction is in the foundation for the but-for stream. In practice many reports blend the two: the history sets the starting point and capacity evidence supports growth beyond it, such as a promotion the person had already been offered. The report states which measure was applied to each period and why, so the trier of fact can see where the history ends and the capacity opinion begins.
Often, yes, as lost earning capacity. The analysis asks what the person could have earned given education, skills, and the local labor market, and whether the record shows an intent and ability to work. The history of employment before the gap is relevant evidence.
Most jurisdictions recognize the loss of the ability to earn as compensable, with the foundation and terminology varying by state. Counsel confirms the governing framework, and the economist presents the figures in the form that framework uses.
By tying each assumption to evidence: the degree program the person was enrolled in, the occupation the training leads to, the published earnings for that occupation and education level in the area, and the vocational and medical opinions on post-event capacity. Where the record leaves the path open, the report shows the result under each alternative.
Request a consultation on Lost Earnings vs. Lost Earning Capacity or call (201) 343-0700. Plaintiff and defense counsel.