What is Earning Capacity/Loss of Earning Capacity Assessment?

Earning capacity can be understood as a function of the interaction between an individual and the labor market in which work takes place. Examples of individual factors include age, education and training, skills, aptitudes, and patterns of occupational or workforce participation. Examples of labor market factors include prevailing wage as well as prevalence and availability of various occupations, and features specific to various employers.

Earning capacity analysis is undertaken where an individual’s ability to earn wages is at issue, such as in divorce matters wherein maintenance is being established. It involves interviewing the individual in question to obtain information about his/her socioeducational background, general health, work history, skills, aspirations, knowledge of the world of work and job search, and overall motivation. This information is then considered in the context of a specific labor market to generate an opinion regarding the maximal earnings that specific person could expect to attain and replicate over time. Many times it also involves assessing whether vocational retraining (i.e. formal schooling and/or obtaining other kinds of vocational credentials) will allow a person to improve upon their earning capacity. If retraining is viable, issues of length and cost of program, as well as expected outcome, are typically addressed.

Loss of earning capacity assessment (usually associated with enumerating vocational damages in personal injury and/or Workers’ Compensation cases) takes earning capacity assessment one step further, encompassing a “before” versus “after” comparison of a person’s ability to earn wages and access the labor market. Pre or uninjured earning capacity is assessed via consideration of the factors previously cited (e.g. age, education and training, overall patterns of workforce participation, etc.). Postinjury potential is configured by superimposing the restrictions associated with the injury as assigned by a doctor or other qualified practitioner. The difference between the “pre” and “post” scenarios represents the vocational impact of the injury or disability. 

Differing medical opinions require the development of differing vocational conclusions, since vocational experts are NOT medical experts and cannot assign restrictions.

The process of assessing loss of earning capacity, or the vocational damages created by an injury or accident, is the same no matter if the work is done on behalf of the plaintiff/applicant/injured party or the respondent/insurance carrier. It involves:

• An in-person, telephonic, or video interview of the individual whose vocational capabilities are being assessed to gather the background information about work history, educational achievement, subjective medical status, etc.;
• Review of written objective documentation such as medical records, tax returns, earnings histories from the Social Security Administration or similar entity, job descriptions, etc.;
• Analysis of the labor market via research of objective data such as labor market projections and/or wage surveys followed by;
• Preparation of a written report and/or delivery of testimony detailing findings and conclusions, with all vocational opinions held to the standard of a “reasonable degree of vocational certainty.”