Calculating Future Lost Earnings with No Earnings History

One common point of disagreement amongst opposing sides of a lost earnings case is future earnings, especially when the claimant has no meaningful earnings history.  This typically occurs in personal injury cases in which the injured party is a child or an adolescent.  Recently published data by the Board of Governors of the Federal Reserve System (“Federal Reserve”) provides data that may substantiate a claimant’s future lost earnings calculation.

The Federal Reserve publishes its Survey of Consumer Finances (“SCF”) every three years.   Its most recent publication includes a  question regarding the highest level of education attained by the interview respondents’ (i.e., families’) parents.  The level of education obtained by one’s parents is one measure of socioeconomic status that can be used to understand inter-generational economic mobility.   Combining this new data/information with the respondent’s income levels allows one to examine whether a relationship between parental education and its child’s income level may exist.

Intergenerational economic mobility studies is a large and active area of research. Some studies indicate that (i) a child’s income level may be correlated to his/her parent’s income level, and (ii) a child’s likely education/skill level may be correlated to the parent’s education/skill level.  The data contained in the most recent SCF indicates that higher levels of parental education are associated with higher incomes and wealth-holding for the respondent.    Based on its survey data, the SCF concludes:

“The typical family in which at least one of the respondent’s parents has a four-year college degree had a little more than double the income and wealth of families in which neither of the respondent’s parents had a high school diploma. However, the relationship between parental education and [respondent’s] income and wealth is not as strong as the relationship between a respondent’s own education and income and wealth. In 2016, the typical family headed by respondents with a college degree had over 3 times more income and almost 13 times more wealth than families headed by respondents without a high school diploma.”

The above results for 2016 (related to the relationship between respondent’s own education and income) are similar going back in time.  By combining the data/information described above with other publicly available data, one may calculate future lost earnings of a claimant with no meaningful earnings history based on, inter alia, the claimant’s parent’s educational attainment.  Read more here.

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