Loss of Wages and Loss of Earning Capacity: What’s The Difference?

As part of a vocational analysis, it is important to distinguish between wage loss and loss of earning capacity, as we are often asked to develop opinions on these different, but related issues.

Wage loss refers to the total sum of wages an individual could have earned during a certain period, but for an injury, and is often quantifiable by referencing tax records or earning statements. For example, if an individual requires three months of medical treatment before he or she can return to work, the wage loss would equal the amount that individual would have earned over those three months. As another example, if an injured individual has returned to work, but then has to miss six months after a back surgery related to the initial injury, the wage loss would equal the amount that individual would have earned over those six months.

Loss of earning capacity, on the other hand, refers to the loss of the ability to earn wages in the future as a result of an injury. In the first example given above, assuming the individual is able to return to his or her prior job with no restrictions after three months of treatment, there would be no loss of earning capacity as a result of his or her injuries. In the second example, assuming the individual is not able to return to his or her prior job as a result of the postsurgical restrictions on his or her activity, the loss of earning capacity would equal the difference in his or her documented salary, or potential wages as estimated by government statistics, prior to the injury and his or her potential earnings after the injury. Determining loss of earning capacity involves careful study of pre- and post-injury abilities, as it is not always the case that a change in occupation necessitated by an injury leads to a loss of earning capacity. In some instances, an individual may have the opportunity to earn the same or more than he or she was prior to the injury.

At Stokes & Associates, Inc. we evaluate the injured individual and carefully review records to determine pre-injury earning capacity. We then investigate various potential post-injury job opportunities to accurately describe whether the individual is likely to experience a loss of earning capacity, and, if so, the extent of that loss. To do this, we perform an assessment of residual employability, use proprietary databases to research alternative occupations based on the individual’s transferable skills and to gather wage statistics, and, when applicable, our research department contacts employers to inquire about available job opportunities, expected salary, physical demand levels, and training required. When appropriate, we investigate vocational retraining or educational opportunities to mitigate long-term losses in earning capacity, particularly with young people who are not yet tethered to a career trajectory.

We offer complimentary consultations concerning "hypothetical matters." To strategize with one of our experts at Stokes & Associates, Inc. please call David Barrett at 504-454-5009, visit our website, www.stokes-associates.com or email dbarrett@stokesassociates.com.

Larry S. Stokes, Ph.D.
Aaron Wolfson, Ph.D.
Todd Capielano, M.Ed., LRC, CRC, LPC, CLCP