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

George C. Alter and William E. Becker provide yet another valuable
contribution to the ongoing dialog on estimates of lost earnings due to
wrongful injury or death. The authors have written a computer program
replicating the BLS worklife model, expanding it to manipulate earnings
projections by age, and allowing selection of a discount rate to
estimate 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 closure
procedure (for persons age 75 and over) than was employed in the BLS
1977 estimates. Our closure procedure has now been modified for better
internal consistency. Alter and Becker also redefine transition rates,
making them conditional on survival. Mortality is factored into their
model somewhat differently than it is in the BLS procedure. However
this is a difference of form rather than substance, the results of the
two techniques being virtually identical.



The authors’ primary purpose in replicating the BLS model is
to draw out some of its unpublished findings having to do with the
age-by-age timing of forgone labor force involvement for persons of a
known labor force status at the time of injury. Readers involved in
liability claims have expressed considerable interest in this type of
data. As I noted in an earlier issue of the Review, it is possible to
derive population-based estimates of worklife during each age from the
published tables. Alter and Becker reassert the need for estimates
specific to the labor force status of the claimant.



The BLS model produces such estimates, but we have not found it
feasible to publish them as part of the Bureau’s worklife bulletin.
(Status-specific estimates by sex, for 60 initial ages, would add at
least 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 only
by sex, but also by race and education. This expansion of the output
from 2 to 12 reference groups will require a cutback in the number of
data items published for each group. We hope to be able to retain the
estimates most useful for analysis of lost earnings. In addition, we
hope to be able to provide on request some of the unpublished findings
of the model, such as initial-status-specific worklife expectancies
within each age, in some form certifiable for use in court.



The Alter and Becker model estimates lost earnings under the
assumption of biannual payments over the claimant’s natural
lifetime. Doing so entails the use of very detailed worklife data
(specifically, estimates of labor force entries and exits at each
subsequent age, for a cohort of a given initial age and labor force
status). We may also attempt to provide counts of these flows in the
unpublished tables, to facilitiate this type of computation.