Loss of Earning Capacity is Not the Same as Loss of Income

Loss of Earning Capacity is Not the Same as Loss of Income

When someone files a personal injury claim for injuries and losses they sustained in an accident, they may seek to recover their loss of earning capacity. Loss of earning capacity sounds very similar to loss of income but these are two very different things.

Calculating loss of income is straightforward

Loss of income in a personal injury case refers to the income or unemployment benefits that are lost as a result of the injuries sustained in the accident. Calculating lost income is fairly straightforward: your wages (hourly, daily, weekly) are multiplied by the length of time you were unable to work due to your injury.

Calculating loss of earning capacity is more complicated

Loss of earning capacity is the income that you would have been expected to earn if the accident had not gotten in the way and prevented you from being able to work. Unlike calculating loss of income, calculating loss of earning capacity is more complicated because the losses have not happened yet—they are losses that are expected in the future.

Several different factors are considered when estimating the loss of earning capacity, such as:

• Work experience
• Skills
• Abilities
• Talents

Establishing the level of future income that an injured person has reasonably lost due to their inability to work involves calculating future wage rates, current market values, and standards of living in the region.

If the injured person is expected to slowly recover from their injuries over time, that estimation is added to the calculation. In cases where the injuries are severe, and the injured person is unable to return to work at all, the earning capacity between the time of the accident and the individual’s expected retirement age must be calculated.

Demonstrating loss of earning capacity in a personal injury claim is complicated. An experienced personal injury attorney will review your claim and provide counsel on the best approach to take for the most favorable outcome.