Earning Capacity vs. Lost Wages
Lost wages are actual income already missed while recovering. Loss of earning capacity is a forward-looking damage — it projects the reduction in the plaintiff's ability to earn income over their remaining work life due to permanent limitations caused by the injury.
Who This Applies To
Loss of earning capacity is most significant when: injuries cause permanent work limitations, the plaintiff must switch to lower-paying work, the plaintiff can only work part-time instead of full-time, the plaintiff is forced into early retirement, or injuries affect a young person with a long career ahead.
How It Is Calculated
Calculating lost earning capacity typically requires two experts: a vocational expert who assesses pre- and post-injury work capacity and the resulting wage differential, and an economist who calculates the present value of that differential over the remaining work-life expectancy. The present value calculation accounts for inflation, wage growth, and discounting future dollars to their current value.
Evidence Required
- Medical records establishing permanent functional limitations
- Physician's opinion on work restrictions
- Vocational expert report on occupational impact
- Pre-injury work history, education, and earnings records
- Economist\'s present value calculation
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