Lost Earning Capacity Calculator
Estimate the present value of reduced future earnings
Lost earning capacity is about more than missed paychecks from the last few weeks. In injury and wrongful death cases, the bigger question is often how the event changed a person's ability to earn money over the rest of a working life. Someone may still be able to work, but only part time, only in a lower-paying job, or only with fewer advancement opportunities. This calculator gives a practical starting estimate of that difference by comparing pre-injury earning power with post-injury earning power and projecting the gap through retirement.
The tool produces two useful numbers. First, it shows the total nominal loss, which is the straight sum of future annual income gaps after applying the wage growth rate you choose. Second, it shows the present value of that loss stream, which converts future dollars into a lump-sum value in today's dollars using a discount rate. Courts, insurers, and economists often focus on present value because a damages award is usually paid now, not year by year over the rest of a career. This page is educational rather than legal advice, but it follows the same core logic used in many damages discussions.
What the calculator measures
The calculator asks six questions because those six inputs drive the basic model. Current age and expected retirement age tell the tool how many working years remain. Pre-injury annual income reflects what the person likely would have earned without the injury. Post-injury annual income reflects what the person can likely earn now despite restrictions. Wage growth rate lets future earnings rise over time rather than staying flat. Discount rate pulls those future losses back to a present-value lump sum.
That means the estimate is not a verdict, and it is not a replacement for a vocational expert or labor economist. Instead, it is a transparent framework for scenario testing. If you want to know how much the claim changes when retirement is delayed, when post-injury work is still possible, or when discount assumptions become more conservative, you can change one input at a time and see how sensitive the result is.
Choosing the inputs carefully
Current age should usually be the age when the earning-capacity loss begins. If the person has already been out of work for a while, current age still matters because it defines the remaining work life from today forward. Expected retirement age should reflect a realistic work-life expectation for that person and occupation. Some cases use 65, some 67, and some higher or lower depending on health, union rules, pension structure, or the physical demands of the job.
Pre-injury annual income should be the best annual measure of what the person was capable of earning before the injury, not just a single unusual paycheck. Salary is the obvious starting point, but you can also include recurring bonuses, commissions, overtime, or other regular compensation if those items were genuinely part of expected earnings. If benefits are important and you want them counted, fold their annual value into the income figure before running the estimate, because this simplified version does not add fringe benefits automatically.
Post-injury annual income is where many real disputes arise. This number should reflect what can still be earned with the injury-related limitations that remain after treatment, recovery, and reasonable vocational adjustment. For some users the right number is zero because the person cannot work at all. For others it may be a reduced amount because lighter work, fewer hours, or a different field is still possible. A sustainable number is better than an optimistic one that assumes the injured person can maintain employment they are not realistically able to keep.
The two rate inputs deserve special attention. Annual wage growth is the expected increase in earnings over time. It can reflect inflation-adjusted raises, seniority, or ordinary labor market growth. Discount rate does the opposite: it translates future losses into today's dollars. When the growth rate and the discount rate are close, present value will be closer to the annual loss multiplied by the number of years. When the discount rate is materially higher than the growth rate, losses far in the future shrink more sharply. The sample values in the form are only examples to help you start; they are not recommendations.
Formula behind the result
The calculation starts by finding the yearly gap in earning power:
Annual loss = pre-injury income − post-injury income.
That annual loss is then projected forward for each remaining work year. Each future year's loss is grown by the wage growth rate and discounted back by the discount rate. If there are N years left until retirement, the present value can be written as:
Here, Ipre is pre-injury annual income, Ipost is post-injury annual income, g is the annual wage growth rate, d is the discount rate, and N equals retirement age minus current age. The calculator also adds the future annual losses without discounting so you can compare the much larger nominal total with the smaller present-value figure.
If you like to think about calculators in a more abstract way, the same logic can be viewed as a function of several inputs. The two MathML blocks below are preserved from the original page and still describe the underlying structure correctly: the result depends on multiple inputs, and a total can be built by summing weighted contributions.
Worked example
Suppose a 35-year-old worker expected to retire at 67, earned $75,000 per year before the injury, and can now earn $30,000 per year because of permanent restrictions. The annual earning loss is therefore $45,000. If you assume 2% annual wage growth and a 3% discount rate, the model projects that loss across 32 years of remaining work life.
In year 1, the future annual loss grows to $45,900 and is then discounted back to present value. The same process repeats for every year through retirement. Using those assumptions, the total nominal loss is about $2.03 million, while the present value is about $1.23 million. The difference between those figures is the whole point of discounting: dollars expected decades from now are not worth the same as dollars paid today.
Scenario comparison
A quick sensitivity check shows how much discount rate assumptions matter. The table below keeps the worked-example ages and income figures the same and changes only the discount rate.
| Scenario | Discount rate | Approximate present value | What it means |
|---|---|---|---|
| Lower discount | 2% | $1.44 million | When growth and discount are equal, each year is worth about the current annual loss in present-value terms. |
| Baseline | 3% | $1.23 million | A slightly higher discount rate reduces the lump-sum value of the same future stream. |
| Higher discount | 4% | $1.06 million | The farther future losses are discounted, the more the present-value award compresses. |
That is why lawyers and experts often debate rates so intensely. A change of one percentage point can shift the valuation by hundreds of thousands of dollars in a long-horizon case.
How to read the result
After calculation, the result panel reports the years of loss, the two annual income levels, the annual earning loss, the total nominal loss, and the present value. Start with the annual earning loss because it is the easiest number to sanity-check. If the yearly gap looks wrong, everything downstream will be wrong as well. Next, confirm that the years of loss match the work-life period you intended. Only then should you focus on the larger total figures.
The nominal loss shows the raw size of the future earnings stream. The present-value number is the more economically grounded lump-sum estimate. If the reduction percentage is extremely high, the note about severe disability gives additional context. If post-injury income equals or exceeds pre-injury income, the tool reports that no lost earning capacity is shown by the entered assumptions. That does not settle every legal issue, but it does mean this simple earnings-gap model is not producing damages.
Important assumptions and limits
Any fast calculator leaves out some details. This one assumes a constant wage growth rate, a constant discount rate, and a single post-injury earning level from now until retirement. Real expert reports may also consider work-life tables, mortality, taxes, fringe benefits, unemployment risk, promotions, partial disability periods, household services, or the probability of future medical deterioration. Different jurisdictions also apply different legal rules to discounting and admissible evidence.
- Benefits and bonuses: include them in the annual income inputs if you want them reflected.
- Mitigation: post-injury earning capacity should reflect realistic retraining or alternative work if that is supported by the facts.
- Rates: small changes in growth and discount assumptions can move the result materially in long cases.
- Timing: the model starts loss one year from now and discounts each year back to the present.
- Professional review: use the result as a planning estimate, not as a substitute for expert testimony or legal advice.
The best way to use the calculator is to run at least three scenarios: conservative, baseline, and plaintiff-favorable or aggressive. That reveals which assumptions truly drive the outcome. If one small change completely transforms the estimate, you have learned something important about the case even before you consult an expert.
Common questions about lost earning capacity
How is lost earning capacity different from lost wages?
Lost wages usually refer to income already missed between the injury and the date of settlement or trial. Lost earning capacity looks forward. It asks how the person's ability to earn money has changed over the remainder of a working life. Someone can have little past wage loss but still have major future capacity loss if the injury permanently blocks a skilled career path.
Should bonuses, commissions, and benefits be included?
Often yes, if they were a regular and reasonably predictable part of compensation. This simplified calculator does not have separate boxes for fringe benefits, retirement contributions, or health insurance, so users who want a broader compensation view can add those annual values into the income figures before calculating. In litigation, those items are often documented separately and supported with employer records or expert analysis.
What if the injured person was unemployed, a student, or changing careers?
A person can still have lost earning capacity even without a current paycheck at the time of injury. The analysis just becomes more fact-intensive. Education, work history, labor-market data, licenses, and probable career path all matter. This calculator can still be used for rough scenario testing, but the income assumptions need more judgment because there is no single current salary to plug in.
Why does present value matter so much?
Because the law often awards one lump sum now for losses that would otherwise unfold over decades. A future dollar is not economically identical to a dollar paid today. Discounting accounts for that timing difference. In practical terms, the same nominal future loss can lead to meaningfully different present-value awards depending on the rate, especially when the worker is young and many earning years remain.
How should I choose a discount rate in a real case?
There is no universal answer. Some jurisdictions use established legal rules, some rely on expert testimony, and some focus on low-risk long-term returns. A lower discount rate raises present value, while a higher rate lowers it. The safest way to use this page is to test several plausible rates and treat the result as a sensitivity tool rather than a final legal opinion.
Mini-game: Case File Valuation Sprint
This optional mini-game turns the same calculator logic into a fast judgment challenge. Moving case files show years left to retirement, an annual earnings gap, and growth and discount rates. Your job is to stamp each file as a low, mid, or high present-value award before it reaches the bench. Big annual gaps and long work lives usually push value up, while higher discount rates pull it down. The game is separate from the calculator result and is only here to make the concept easier to feel.
This optional game does not change the calculator. It teaches the same takeaway in motion: a larger yearly loss carried across more working years usually creates the biggest present-value awards, but discounting compresses dollars that arrive far in the future.