Estimating lost future earnings using the new worklife tables: a comment Essay

George C. Alter and William E. Becker provide yet another valuablecontribution to the ongoing dialog on estimates of lost earnings due towrongful injury or death. The authors have written a computer programreplicating the BLS worklife model, expanding it to manipulate earningsprojections by age, and allowing selection of a discount rate toestimate the present value of those lost future earnings.

I have no reservations about the worklife component of their model,which is nearly identical to our own. They do use a different closureprocedure (for persons age 75 and over) than was employed in the BLS1977 estimates. Our closure procedure has now been modified for betterinternal consistency. Alter and Becker also redefine transition rates,making them conditional on survival. Mortality is factored into theirmodel somewhat differently than it is in the BLS procedure. Howeverthis is a difference of form rather than substance, the results of thetwo techniques being virtually identical. The authors’ primary purpose in replicating the BLS model isto draw out some of its unpublished findings having to do with theage-by-age timing of forgone labor force involvement for persons of aknown labor force status at the time of injury.

Readers involved inliability claims have expressed considerable interest in this type ofdata. As I noted in an earlier issue of the Review, it is possible toderive population-based estimates of worklife during each age from thepublished tables. Alter and Becker reassert the need for estimatesspecific to the labor force status of the claimant. The BLS model produces such estimates, but we have not found itfeasible to publish them as part of the Bureau’s worklife bulletin.(Status-specific estimates by sex, for 60 initial ages, would add atleast 120 pages of tables to an already lengthy publication.)Nevertheless, we have taken note of the demand for such estimates. Our next worklife publication is slated to include tables not onlyby sex, but also by race and education. This expansion of the outputfrom 2 to 12 reference groups will require a cutback in the number ofdata items published for each group.

We hope to be able to retain theestimates most useful for analysis of lost earnings. In addition, wehope to be able to provide on request some of the unpublished findingsof the model, such as initial-status-specific worklife expectancieswithin each age, in some form certifiable for use in court. The Alter and Becker model estimates lost earnings under theassumption of biannual payments over the claimant’s naturallifetime.

Doing so entails the use of very detailed worklife data(specifically, estimates of labor force entries and exits at eachsubsequent age, for a cohort of a given initial age and labor forcestatus). We may also attempt to provide counts of these flows in theunpublished tables, to facilitiate this type of computation.

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