Loss of Future Income in the Case of Personal Injury of a Child: Parental Influence on a Child's Future Earnings

Pr~ecting the earning capacity of a wrongfully-injured minor child is problematic because there is no established earnings record that can be used to estimate the child’s future income. In the absence of earnings data, economists use average income figures from governmental publications to determine what the minor child might have earned if the injury had not occurred. This procedure is inaccurate in predicting what a child’s potential earnings are. Consequently, the judicial system will not know with any degree of accuracy what the ’fair value’ of an award to a wrongfully-injured child should be. The purpose of this paper is to develop a method of estimating what a minor child with no work history would have earned had there been no injury, based on his demographic and familial characteristics. This is accomplished by using an ordered probit model in which the probability of attaining a given educational level is estimated from family background information. With demographic and familial characteristics identified, we can predict the potential lifetime earnings of a child who has these characteristics. ~ Brookshire (1987) maintains that the alternative to creating what he calls the ’statistical person’ is to make a projection that takes into consideration race, sex, age and the probable educational attainment of the minor had the minor not been injured. Marlin (1988) concurs that, if there is no work record upon which an estimate can be based, then the best gauge of future earnings is probable educational attainment. A crude way of predicting the child’s chance of going to college, according to Marlin, is to ask the child’s teachers to estimate the likelihood of the child going to college. This indirect evidence can easily be questioned in a court of law. Marlin, like Brookshire, suggests using average income census data (broken down by state, age, race, location in the state, and educational level) as an estimate for the earnings potential of the injured child. The important question (and one that has not been answered by forensic economists but which our model attempts to answer) is upon what assumed educational level, and hence income, the projections will be based. Once we can calculate a monetary value of what a child would have earned, based on the predicted probability of that child’s attaining a certain level of education, then the courts can make a more informed decision in awarding