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Lost Wages vs Loss of Earning Capacity

What’s the Difference Between Lost Wages vs Loss of Earning Capacity?

When a car accident affects your life and health, it can affect your ability to do your job, whether temporarily or permanently. You may need to take time off from work to undergo treatment, or you may have a diminished ability to perform your job. This, unfortunately, is a very real possibility after a car accident in Arizona. This may result in a temporary or permanent lost wages or loss of earning capacity.

There is a difference between a lost wage claim and a loss of earning capacity claim.

Personal injury claims involving a car accident in Arizona will usually include loss of wages claims and potentially lost (or diminished) earning capacity claims.

The injury attorneys at Phoenix Accident and Injury Law Firm near you have significant experience in helping clients who have experienced both loss of wages and loss of earning capacity after a car accident in Arizona  Our offices are conveniently located in nearby ChandlerPeoria, and North Phoenix, and we can meet in person, over the phone, or via video call.

If you are unsure whether or not you can afford an attorney, don’t worry. We only get paid when you settle. Check out our Attorney Fees Calculator to find out more.

Lost Wages vs Loss of Earning Capacity

These are two very different things.

Loss of Wages is defined as income lost from the date of the event continuing through the date that you return to work. It is compensation for missed paychecks while rehabilitating from injuries. Lost wages refers to the present condition, what is currently happening to you after your car accident in Arizona. It has nothing to do with not being able to work or earning less money while you are recovering from your injuries.

You can prove loss of wages through shorter work hours, vacation or sick time taken, or a letter from your employer stating you were put on light duty.

Loss of Earning Capacity is a form of damage distinct from the more commonly known loss of wages. It counts income losses to the end of one’s work-life expectancy. It arises when your car accident in Arizona creates an ongoing, long-term, or permanent disability that restricts the amount or type of work you can perform.

Often, it may also affect your ability to find work and reduce your work-life expectancy. For example, if one suffers a spinal injury or has a surgical repair procedure that limits future mobility (such as a shoulder injury), he or she may be entitled to a loss of working capacity claim.

How to Establish Your Loss of Earning Capacity Claim

First, understand your damages. General damages are costs sustained by a plaintiff. These cannot be calculated to a specific dollar amount. Examples are pain and suffering while going through treatment, changes in your home life, and changes in your duties at work.

Special damages, on the other hand, can be calculated to the cent. Examples include medical bills, time taken off work, and prescription costs. Experts in vocational economics can figure the dollar amount of loss of wages as well as your loss of earning capacity.

You can have both a lost wages claim and a loss of earning capacity claim.

The Arizona Supreme Court has found that impairment of earning capacity is an item of general damage. This ruling allows recovery for the loss of future earning capacity. The determination of earning capacity is based on factors such as the plaintiff’s age, life expectancy, health, habits, occupation, talents, skills, experience, training, and industry. Meanwhile, loss of wages is considered special damage.

You can show your present lost wages using pay stubs and evaluate whether you may suffer the same issue in the future. Much of this depends on whether your injury is long-term or permanent.

An occupational disability is a long-term or permanent injury that has a deleterious effect on your ability to find and perform work. Your occupational disabilities might be mental or physical (or both). They can even be fairly minor but have a severe impact on your future work prospects. Your loss of wages claim will be your starting point.

Because loss of working capacity is a measurement of future earnings minus losses for future work prospects, even minor injuries can result in significant losses that the court should remedy.

On average in the United States, people suffering from an occupational disability earn less than their peers, controlling for other factors. Their work-life expectancy, or the measurement of years spent working and expected lifetime earnings, is typically less than their non-disabled counterparts.

In court, the determination of loss of working capacity revolves around economic and vocational experts from both the plaintiff and the defendant. The experts will, using economic and vocational statistics, determine what you would have reasonably earned throughout your life. They also determine what your likely earnings are—now that you are disabled—even if your disability is temporary. The jury will be asked to award you the difference between those two figures.

How to Use an Expert to Establish Lost Wages vs Loss of Earning Capacity

Here is where you need to hire an expert. You need an economist with a vocational background to provide an opinion on your future earnings.


Economists use your pre-injury job history to project future earnings. An economic expert will use the same calculations that would be used in a permanent disability or wrongful death case. Proof of wages and documentation regarding bonuses, promotions, and wages are used to protect the plaintiff’s future earning capacity had the injury not occurred.

The younger you are and the fewer jobs you’ve held, the more difficult it is to protect your future earnings. This is also because lost earning capacity damages must take into account the potential for changing careers.

In and of itself, an economic report cannot establish a diminished working capacity. It must be backed up by the underlying medical issues affecting your ability to work. You need to have documentation showing what you could do before the car accident in Arizona that you can no longer do. Put another way, you will also need a medical expert.

Medical Experts

A medical expert will be able to testify on the types of movements and stressors your body can withstand post-injury, such as lifting certain weights. A doctor may also be able to give a percentage of total disability, which can be used to evaluate earning capacity reduction.

Vocational Experts

Vocational experts merge the information derived from both economic and medical experts. They review the economic and medical reports and conduct tests with you. Combining the resulting information with expert knowledge of labor markets and pay scales, the vocational expert can provide the jury with a concrete number for your post-injury earning capacity. Once subtracted from the economist’s figure, the resulting amount comprises the lost earning capacity portion of the claim.

In temporary disability cases, the vocational expert, along with the medical expert, can be used to determine the likely length of rehabilitation needed for the type of work desired. This gives the economic expert an endpoint to halt your prospective uninjured future working capacity.

What the Vocational Report Means for Your Case

Vocational reports focus on the lost wages that can be earned when working. The report is compiled with medical reports, intelligence tests, tests of your manual dexterity, and your ability to perform skills. It examines your work history with particular emphasis on the mental, physical, and emotional demands of your past and present jobs.

The nature of your injuries and their limiting effects on the type and range of jobs that you can now perform is also noted in the report. If rehabilitation, full or partial, is possible, this is included in the report to the extent of ability restored and when. The report will include the expert’s judgment regarding your current skills and to what types of jobs your injuries allow.

The vocational expert will then examine several factors regarding work in the relevant community or metropolitan area where you live. The report will analyze your power to earn money compared to your pre-injury earning capacity, usually in the form of a percentage, though the best estimate is usually actual earnings pre-injury.

Vocational experts often employ data banks from which they can determine the jobs available in the labor markets relevant to you. Using the wage information regarding those positions, they will then translate this data into the median earning capacity for you.

Future Care Reports and Why You May Need One

A future care report discusses the likelihood that your injuries are such that you will have a substantially harder time finding work at all. Here, the vocational expert will discuss employability statistics of the area as they relate to disabled individuals. Notably in the report: are the reported number of disabled adults in the community, the percentage thereof that is working, and the percentage of those seeking work and presently unemployed. From these figures, the expert will derive employment rates, participation rates, and joint probability of employment and participation. From this report, using the expert’s opinion, the expert will determine the likelihood that you will be able to find work.

Further, the report will explain that disabled workers typically are paid less and employer contributions for fringe benefits may be lower. All of these factors also apply to household work at home (and may be applied to stay-at-home spouses). This will give the jury evidence to show that your ability and likelihood to work are diminished.

Arizona Supreme Court and other courts across the country have relied on these types of reports in assessing an individual’s compensation in a car accident in Arizona cases. For examples of loss of wages cases along with court rulings, keep reading.

We Can Help You Rebuild Your Life

Lost working capacity can be a large part of the personal injury award you stand to recover from your injuries. The sad fact of the matter is that the negligence that led to your injuries may have seriously, even permanently, robbed you of a long and productive work life. This can and should be factored into the award you receive from the jury, along with the loss of wages you have already experienced.

While the process of being tested and providing documents to these experts can be tedious, your attorney must get the best possible outcome for you in your case. An understanding of how working capacity is formulated will hopefully help you in answering questions and getting through the court case.

For legal advice in proving your loss of wages and lost earning capacity claim, contact us at the Phoenix Accident and Injury Law Firm website. Our attorneys near you are ready to help you overcome the burden of proof and help you rebuild your life after a traumatic and painful car accident in Arizona.

Case Example of Loss of Wages vs Loss of Earning Capacity

Lost Wages

A financial analyst working for Bank of America earns $70,000 per year. If the analyst got in a car accident in Arizona and took three months off work due to her injuries, loss of wages may be easily calculated.

We calculate how often she was paid—24 or 26 times a year—accounting for the fact that she took three months off for treatment. As a result, the at-fault driver is responsible for three months of wages.

You may argue that she still was paid during those three months because she was salaried. And you would be correct, but she wasn’t there to do the work. While the work still got done, her employer and her colleagues stepped in as a result of this car accident in Arizona. Therefore, the at-fault driver is still responsible for the time taken away, even if the victim was salaried.

Loss of Earning Capacity

Her lost earning capacity, however, might be a different story.

The question becomes whether she is still able to do the same type of work. What if she has suffered a significant neck injury? Is she still able to sit for long periods as her job requires?

A vocational rehabilitation expert is the most qualified person to determine whether a plaintiff has sustained a loss in earning capacity.

Anyone who works in a competitive labor market needs skills to perform the essential functions of the jobs for which they are qualified. Only a vocational rehabilitation expert can determine if one’s skill set allows one to transfer to another job that pays comparable wages. If not, the individual has lost earning capacity. Whether or not this loss might continue over one’s work-life expectancy is an individual-specific determination that only a vocational rehabilitation expert can make.

A vocational rehabilitation expert and an economic evaluation would be most helpful to determine what future limitations she may face in her career as a result of the car accident in Arizona.

Lost or diminished earning capacity may be mitigated through occupational retraining where one can acquire additional skills before returning to work. In many cases, with a short-term investment in training that might take someone out of the workforce for a defined time, the new skills could result in new opportunities and higher earning power.

All of this information is key to reaching the appropriate settlement in a personal injury claim.

Below is a summary of these types of cases.

Other Case Examples of Loss of Wages vs Loss of Earning Capacity

Ball Corporation v. George (1976)

Irene George brought suit against Ball Corporation for injuries sustained to her eye after a glass bottle exploded in her home. Ball Corporation was the manufacturer of the bottle.

Irene, who had a part-time job working in a local school cafeteria, experienced permanently diminished vision.

The Court of Appeals ruled that, even if Mrs. George had never been employed outside of her home, she could be entitled to loss of earning capacity damages. Past earnings did not need to be proven. There was no requirement that Mrs. George shows a desire to reenter the workforce.

The jury awarded Irene George $175,000 (adjusted for inflation: $728,962.65) in damages, including lost earning capacity.

Rossell v. Volkswagen of America (1985)

This case was brought against Volkswagen for injuries sustained by Rossell’s minor daughter in a car accident in Arizona

The car flipped and skidded. Dripping acid from a broken battery severely burned the unconscious defendant’s upper body and face. The acid caused permanent injuries and disfigurement.

The jury awarded the plaintiff $1,500,00 (adjusted for inflation: $3,304,140.33), partially in recompense for lessened future earning capacity, despite the minor child having no work history.

Felder v. Physiotherapy Associates (2007)

In 1998, Felder, a professional baseball player for the Milwaukee Brewers, was rehabbing from an elbow injury at a Tempe-based physiotherapy facility.

A ball bounced off of an improperly maintained batting cage and struck Felder in the eye, causing an orbital fracture.

After lengthy testimony by a bevy of experts, the jury awarded Felder $7,000.000 less than the 30% it attributed to his fault, bringing his damages to $4,900.00 in lost earning capacity.

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