Project the working life that was interrupted, subtract the one that remains. Both halves need evidence.
Start a conversation with Cournot, the Institute’s damages concierge, already scoped to lost earnings & capacity. Pick a starting point, or describe the dispute directly.
The earnings claim is a subtraction: the path the person's earnings would have followed, less the path now available to them. The first half starts from the earnings base, what the person actually earned, established from tax returns, payroll records and, for the self-employed, business records that separate the value of the person's labor from the return on their capital. The base then grows along a trajectory, and the trajectory is evidence, not optimism: age-earnings profiles from government data, the person's own trajectory of raises and promotions, occupation and industry outlooks, and for the young or credentialed, the statistical earnings associated with their education and field. The second half is the residual: what the person can still earn given the injury or the termination, informed by vocational assessment in injury matters and by the actual record of the job search in employment matters. Between the halves sit the components that travel with work, employer benefits and household services, and the adjustments that keep the model honest. Everything then rides on the machinery covered elsewhere in this area: how long the earnings continue, and how the stream is discounted. The model is standard. The inputs are the case.
Each element has a conventional data source and a conventional fight.
Tax returns and payroll history. For the self-employed, the labor value extracted from business results, which is its own analysis.
Age-earnings profiles, the person’s own history, occupation data. Where injury claims are inflated and where they are attacked.
Health coverage, retirement contributions, other compensation. Valued from records, not assumed as a flat markup.
The unpaid work the person can no longer perform, priced at replacement cost with published methodology.
What the person can still earn: vocational evidence in injury matters, the actual search record in employment matters.
The earnings that did or should have offset the loss. The defense’s half of the model, and it needs the same rigor.
How the Institute approaches an earnings claim.
Usually the largest component of an individual claim.
Business profit is not personal earnings. It mixes the value of the person’s labor with returns on capital, the work of others, and business risk. Separating out what the person’s own labor commanded, what it would cost to replace them, is the analysis, and skipping it is the standard defect in self-employed claims.
Statistically, from the population the person was on track to join. Published data links education, field and occupation to earnings distributions across a working life, so a claim for a student or an early-career worker is built from the earnings of people with the credentials and path the evidence shows this person had: admissions, grades, licensure progress, early job offers. The discipline is in the word "shows". A claim projecting the median outcome of a path the person had demonstrably entered is conservative and defensible. A claim projecting the top of a distribution the person had merely hoped to enter is the version that gets taken apart. Where within the plausible range to pitch the claim is a strategy question worth making deliberately with counsel.
As the subtracted path, and it deserves the same evidentiary standard as the projected one. In employment matters the record of the search matters: applications, interviews, offers accepted or declined, and the earnings of the replacement job, which may close the loss entirely or leave a persistent gap if the new position pays less. In injury matters the residual path comes from vocational evidence about what work the person can perform with their limitations and what it pays. The legal burden of proving a failure to mitigate generally sits with the defense, but the economics should not wait for that: a claim that models the residual path candidly, including what the person could reasonably earn, is more credible than one that models zero and dares the defense to disagree.
Carefully and consistently, because the rules differ by claim type and forum and the modeling must follow the law that applies. Recoveries for personal physical injury are generally excluded from income taxation, and in some jurisdictions that pairs with projecting after-tax earnings; employment recoveries are generally taxable, which raises the further question of an adjustment for the tax burden of receiving years of income as a lump sum. Which regime applies, and whether a gross-up is available, are legal questions counsel must resolve for the specific claim. The economist's obligation is internal consistency: pre-tax earnings with pre-tax discounting or after-tax with after-tax, stated openly, because a model that mixes the two has a defect that is easy to find and hard to explain away.
Its endpoint is contested rather than statistical. Back pay runs over a period that has already happened and can be measured against actual records. Front pay projects forward from judgment, and its duration is not read off a table: it turns on how long the effects of the termination will plausibly persist, when comparable employment is likely, and in some framings how long the person would have remained in the lost job. Whether front pay is available at all, and whether judge or jury decides it, varies by claim and is counsel's terrain. The economic contribution is to give the endpoint a reasoned basis, search-time evidence, occupation data, the person's circumstances, rather than an arbitrary horizon, because the arbitrary version is the one that draws the challenge.
Describe the person and the interruption. The Institute will help you see what the earnings claim needs.