Projecting Future Earnings

The defining characteristic of personal injury, wrongful discharge or wrongful death cases is that they require the expert to predict the future rather than to analyze events in the past. Moreover, two alternative projections of future earnings must be done: one, of the earnings plaintiff would have enjoyed over his or her work life but for the damaging incident at issue and the other, what work life earnings are likely to be now.

Since no one – not even one of Integral’s experts -- has a crystal ball, the damage estimate will be credible only if the methodology used to construct it is grounded in economic principles and empirical research.  Ad hoc procedures won’t do. The most widely-accepted studies have found that the average individual’s real earnings do not grow at a constant annual rate over the work life, but tend rather to increase most rapidly in the early years of the work life; continue to grow, but at a slower rate as they move into the middle years of their work life; and then plateau (or even decrease) towards the end of the work life.  Integral’s experts use a projection methodology based firmly on this research.

Customizing the Earnings Projections

 Just how fast earnings grow early on, the age at which they peak, and whether or not they turn down at the end of the work life tends to vary from person to person depending on individual factors such as education level, occupation, and intensity of labor-force attachment. Data  -- available in the U.S. decennial  census -- on age, earnings, education level (and type) and occupation -- allow us to customize each earnings projection by basing it on the observed age-earnings experience of individuals who resemble the plaintiff as closely as possible with respect to each of these factors.

Projecting Losses in Employment Benefits

Employment benefits are often a significant portion of total earnings. Some of these benefits – employer contributions to 401-K and other capital accumulation plans or to defined benefit pension plans – vary with salary. So our projections of lost benefits will depend upon our projections of future salary.  Some employment benefits – like employer contributions to health insurance – are not usually linked to salary, and these will be estimated separately.

Taking Account of Inflation

We are forecasting into the future so we our projections must reflect an assumption about future inflation rates. Integral’s experts use the same standard and neutral methodology from case to case.

Discounting to Present Value

The estimates of future losses will be presented in two ways: in current-year dollars and in present-value terms.