Actual, Expected, And Wage Earning Capacity
The typical assignment for vocational rehabilitation counselors in litigated personal injury cases includes the questions: “What was the plaintiff’s wage-earning capacity before the injury, and what is their wage-earning capacity after the injury?” Key to answering these questions are the concepts of actual earnings, expected earnings, and earning capacity.
Actual or demonstrated wages are historical earnings established through employment and compensation records such as social security earnings, tax returns, W-2 records, or pay stubs. In cases where there is an established work record, actual earnings can be a good measure of the pre-injury wage-earning capacity. Variables such as full-time versus part-time labor force participation and propensity to work are important in assessing whether actual or demonstrated wages are the most appropriate metrics for describing pre-injury earning capacity.
Expected earnings are estimated wages related to the plaintiff’s vocational profile. Expected earnings are determined based on the typical wages, usually given in a range, paid for occupations and jobs that a person could have worked in the past or can work in the future. For example, if a worker demonstrated the ability to earn $20 per hour in the past, we can expect they would have earned $20 per hour in the future but for an intervening incident. Expected earnings do not consider the worker’s efforts to maximize earnings by working the maximum number of hours at the highest-paid job they can perform.
Wage-earning capacity is the value an individual can expect to earn if they choose to work to their capacity. The estimates are based on the expected wages paid for particular occupations as determined through published statistical wage data and labor market research. However, wage-earning capacity is not always the maximum amount of wages related to an occupation in the labor market. Therefore, individual personal factors need to be brought into the assessment process.
The assessment of wage-earning capacity versus actual earnings should be used if there is not a well-established pattern of work suggestive of a history of working at capacity. For example, while finishing nursing school, an individual chooses to work in a nursing home as a Certified Nursing Assistant (CNA) and is subsequently injured. Their pre-injury earning capacity could be based on their demonstrated or actual wages as a CNA; however, it may be more appropriate to base the pre-injury earning capacity on the statistical wages for nurses.
The determination of pre and post-earning capacity is specific to the individual’s vocational profile, including age, education, training, work history, skills acquired and transferable skills, vocational test results, and physical and/or cognitive capacities. Therefore, vocational rehabilitation counselors need to consider the most appropriate method for communicating earnings in forming opinions regarding residual earning capacity.