Research & Publications

Damages: Estimating Pecuniary Loss (Chapter 3)

by Cara L. Brown

Chapter 3 - How to Forecast Growth of Earnings.

Once a plaintiff's base year earnings have been established, an economist must consider the impact that inflation, productivity, and real wage growth will have on that benchmark of annual earnings. Chapter 3 focuses on the case law which discusses these earnings growth factors and it provides economic data to support many of the assumptions and principles that economists apply to their calculations when adjusting a plaintiff's base year earnings for these factors. The chapter forecasts the rate at which wages will increase, if at all, over and above inflation, i.e., productivity. Various factors affecting productivity are explored, including the structure of the Canadian economy, differences across industries, and differences across firms. Regarding real wage growth, which refers to increases in a worker's base salary due to individual circumstances such as promotion, merit, or tenure, Chapter 3 surveys how work experience and education affect age-earnings profiles, gender differences in real wage growth, and the evaluation of data used to construct age-earnings profiles.