In Personal Injury Litigation – the Difference Between Future Earnings and Future Earning Capacity, economic damages expert witness Ronald T. Luke, JD, PhD and Mary L. Hoane, CPA/CFF, MBA write:
This paper discusses one of many issues that can arise in calculating economic damages in personal injury litigation. The issue is the important distinction between projecting a person’s future earnings and a person’s future earning capacity. Earnings are defined as remuneration of a worker for services performed during a specific period of time. When projecting future earnings the economist is projecting the amount the person would have earned but for an injury. When projecting future earning capacity the economist is projecting the amount the person could have earned if he had chosen to maximize his earnings.
In litigation where the injured party remains alive and able to receive a damages award, the correct measure of damages is loss of future earning capacity; the amount the injured party could have earned had the injury not occurred less the amount he could earn given the physical or mental limitations resulting from the injury. When the injured party is deceased, the measure of damages in a wrongful death case is the amount of support the survivors would have received from the injured party. The starting point in calculating the amount of support is the projected earnings of the deceased: the amount the deceased would have earned and from which support could have been paid to the survivors.