Loss of Income vs. Lost Earning Capacity: What’s the Difference?

The terms “loss of income” and “lost earning capacity” are often confused when it comes to personal injury cases. However, they mean different things. Loss of income is money a plaintiff loses from the date of injury to the date they can return to work. Lost earning capacity refers to the money they could have made but cannot because their injuries prevent them from working in that role.

If you are unsure how these terms could affect your injury case, you can consult with our personal injury attorney, who can explain how they work and if they affect your case’s outcome.

What Is Loss of Income?

Loss of income is a term that refers to wages and benefits lost due to an injury for which another individual or entity is liable. For instance, if an injury kept you out of work for a month, you would have a specific monetary amount to report for the time you could not earn money at your job.

An injury victim can seek compensation for lost income from a defendant who caused their injury and is liable for their damages. The lost income can be calculated all at once if the plaintiff can prove they missed work due to their injury. 

However, if beyond that first month, they may have missed another few weeks strewn out over several months. These days, if due to medical care such as surgery and therapy, may be considered as follow-ups to the initial injury. If they missed time on the job for these appointments, the plaintiff might also claim damages for them.

What Is Lost Earning Capacity?

Lost earning capacity is not the same claim as loss of income. Instead, the plaintiff claims their injuries had reduced their ability to earn the gainful income they were due before they were injured. This is also sometimes referred to as future lost earnings.

For example, say a plaintiff’s leg was broken. As a commercial truck driver, the plaintiff cannot work at their job with a long-lasting injury. This may entitle the driver to seek compensation regarding lost earning capacity because they can no longer continue working in their initial position.

Lost earning capacity is assessed by the following:

• Reviewing the individual’s work history, including their skills and talents
• Hiring medical experts to establish how the injury impacted the plaintiff’s current job or ability to engage in future work
• Using wage comparisons and market values to determine how much in the future the victim would have likely earned, or basically, estimating how much money they have lost due to the injury

Fortunately, you do not have to understand and navigate all the ends and outs of personal injuries and accidents. A personal injury attorney with our firm can help you initiate a claim against the party or parties involved.

‘Loss of Income’ Deals with the Past, While ‘Lost Earning Capacity’ Deals with the Future

In a nutshell, loss of income is for time and earnings lost in the past, while lost earning capacity is based on projected amounts for the future. The latter assumes that the plaintiff can no longer return to work at the same job, be forced to work fewer hours, or have a long-term disability. The loss of income only accounts for the actual time missed from work and is not based on “estimated guesses” or expert witnesses.

Loss of income is relatively easy to prove. A plaintiff needs to show their hourly or salaried wages, employer verification, and timesheets showing the time they missed from work. 

Conversely, lost earning capacity is more challenging to prove and will typically require the help of legal counsel and the testimony of an expert witness, such as an economist. It requires calculating the estimates of projections and determining what an individual would earn in the future and assessing how long the injury will prevent them from working, whether temporary or permanent.

How Is Lost Earning Capacity Calculated?

Lost earning capacity is not estimated based on the individual’s actual earnings before or following an injury. Instead, this is calculated based on the person’s ability to make money in general. Moreover, the court calculates the person’s earning capacity before their injury and compares it to the diminished earning capacity caused by the injury. Losses will then be issued based on the disparity between the person’s potential earning power and their actual earning power, not their past earnings.

The logic behind damages for future lost earnings is that it is believed that the injury has severely reduced the person’s ability to earn wages in the future. Thus, even if they were jobless in the past or at the present time of their injury, it will not stop the court from granting damages for future income-related losses.

Did Your Injury Affect Your Income? Call Us Now

If you have incurred a severe injury that took you away from work or prevented you from returning to work, you may want to consult with a personal injury lawyer to help you seek compensation for your past and future lost income. 

Contact the Law Office of Cohen & Jaffe, LLP today for a free case consultation.

For a free legal consultation, call 516-358-6900