Estimating Remaining Years of Work Life

The heart of analyzing lost earnings and wages is estimating by how much injury or death decreased a person’s lifetime earning capacity. This requires estimating how many years the injured or deceased party have otherwise continued working. In some cases, there may have been definite plans for retirement from the labor force at some specific age. This is more likely to be the case for older workers. As long as these plans are known and credible, they can serve as the basis for the estimate of lost earnings. More often, the economist will have to choose some assumption for remaining work life. The simplest assumption is that retirement would come at the age of eligibility for full Social Security benefits. An alternative is to use government data on the median number of years to retirement for workers at any given age and assume that the person would have continued employment for that length of time. These assumptions ignore the reality that many people do not conform to these retirement patterns. Many continue in the labor force into their seventies and even longer.
“Experts” who use these easy assumptions, who may be economists or accountants, typically also ignore the fact that workers at any age have some statistical probability of not being able to continue earning income due to death, physical incapacity, or unemployment. Any sound estimate of future earnings must be adjusted to account for these realities. To overcome these difficulties, competent forensic economists most often use published tables that report the average number of remaining years of employment people have at any age. These tables use information supplied by the federal government on employment and death rates for people in various sex, age, race, and educational groups. With these tables, an economist has a sound basis for estimating lost income that can be easily explained to a jury.

The Economic Evidence Gatekeeper (2.9.2005)

Daubert challenges to economic expert testimony
A free internet resource for attorneys with cases dealing with economic experts

02.09.2005

By Line: Court orders new trial because defense expert was not allowed to testify

Case: See Dorn v. Burlington N. Santa Fe R.R., No. 03-35071 (9th Cir. Feb. 7, 2005) (Kleinfeld, Callahan, & Bertelsman, JJ.)

Reporting source: Daubert on the web (http://www.daubertontheweb.com/blog702.html)

Type of economic damage testimony: Hedonic damages

Commentary on importance of the case:

Shows that hedonic damages are not dead; at least in Montana. However most economists belief they are. According to a recent survey of economists in the Litigation Economic Review Vol.6 No.2, only 1bout 17.8% of forensic economists would perform a hedonic damage analysis if asked by a plaintiffs attorney.

Synopsis of economic damage testimony:

"The plaintiff's attorney testified to a value for what he called "hedonic damages,"
and what is commonly called in tort law jury instructions
"loss of enjoyment of life." His methodology was to use
government statistics to determine what risk premium
employees demand to work in riskier jobs as opposed to the
less risky jobs they could get with the same credentials, what
people pay for safer equipment and consumer goods as compared
with less safe ones, what people spend on government required
safety equipment, what government spends on programs
that reduce risk of death, and what government regulations
require people to spend on reduction of risk. He came
up with a figure for loss of enjoyment of life for an average
person."


Summary of court opinion dealing with economic damage testimony:
(click here to download full text opinion)

From the opinion:

"[The plaintiffs expert's] methodology may have some utility. It may be informative
to a jury to know what people spend voluntarily out
of their own pockets to reduce their own chances of death.
The figure [the plaintiffs expert] arrived at gives some finitude to a question
that can sound like a probe into the infinite."