Developing Statistical Based Earnings Estimates: Median versus Mean Earnings
Lawrence M. Spizman (2013). Developing Statistical Based Earnings Estimates: Median versus Mean Earnings. Journal of Legal Economics 19(2): pp. 77-82.
When estimating losses associated with personal injury and wrongful death, a forensic economist normally examines the plaintiff’s earnings records to determine lost income. When a plaintiff does not have an established work history, statistical based earnings estimates must be created. Consequently, a forensic economist must determine and understand the implications of using either mean or median earnings for such estimates. Injured plaintiffs, such as minor children, homemakers, and college students, usually do not have an established earnings record. Determining earning losses for a minor plaintiff requires knowing the average earnings associated with the minor’s pre-injury educational level. If the plaintiff is an injured homemaker who was planning on re-entering the labor market, average data may be used to establish future base earnings. A college student injured while in school may require using college graduates’ average earnings as a base to estimate lost income. A vocational expert may use average data as a base for residual earnings of a plaintiff. Regardless of the circumstances and characteristics of the injured plaintiff, an economist must choose carefully which data source to use. Two widely used data sources published by the United States Census Bureau are the Current Population Survey (“CPS”) and the American Community Survey (“ACS”).
Lawrence M. Spizman
Base Earnings, Interest (Discount) Rates & PV