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Vocational Law: Loss of Income vs Loss of Earning Capacity

Loss of income and earning capacity may sound similar in nature, but they differ greatly when it comes to a personal injury case. Loss of income, in particular, is a current widespread fear in the age of COVID-19.

In the following article, our personal injury experts at Solutions Northwest Inc. will go over the major factors that differentiate the two. However, let’s start with a definition of each. 

What is the definition of lost income and earning capacity?

Lost income is for work that has already been done. Loss of earning capacity means the money you would have made had you been enabled to go on working at your normal capabilities.

One deals with the past, while the other deals with the future. In both cases, you will need to replace the income that is no longer coming your way.

Figuring that out for the purposes of a settlement depends on the following factors:

1. Pay Stubs

The easiest way to replace your income through an insurance claim or lawsuit is to be able to show the actual work you have missed due to an injury that isn’t your fault. You can do that by pointing to your pay stubs and tallying up a total

number based on how many of them you have gone without. This primarily would pertain to loss of income.

2. Work Experience

The more work experience you possess, the higher your earnings will probably be. This is important when trying to prove missed earning capacity to your loss of earnings insurance provider. While more difficult to do, it can certainly help increase the size of your settlement.

3. Skills and Education

Another key factor in getting the replacement income you deserve is to be able to point to your skills and education. This varies among the workforce, and the more advanced you are, the more capable you are of demonstrating a higher earning capacity.

4. Promotions and Career Growth

Perhaps one of the most difficult things about calculating earning power is projecting possible promotions and career growth with a high enough degree of probability that the law will be on your side. To pull it off, you will need a great attorney and vocational experts.

You will also need ample documentation regarding your work, skills, and acknowledged performance. Consider examples like sterling employer reviews or acceptance into an established management training program at your company.

5. Time Away From Work

Time missed from work can help you clearly determine loss of income. Just factor up your rate of pay at the time of your injury and multiply by the number of checks you will miss. If you are included in an across-the-board raise with other workers during that time, you may have to make adjustments to factor in that fluctuation. 

Time away from work may also affect your earning capacity. We see that in the reduced number of hours COVID-19 has forced upon parents, particularly women.

6. Severity of the Injury or Impairment

Being out for an extended period of time, which can affect both loss of income and earning capacity, is the final factor we’d like to cover. If you’re out for an extended period (see above), loss of income should be easy to prove.

Out for good? That’s where you’ll need to start factoring in the intangibles to get at a believable number for earning capacity

In conclusion, loss of income and earning capacity are worth exploring.

If you are out of work for any length of time, you may only qualify for loss of income. However, both lost income and earning capacity are worth exploring the longer the situation goes on. 

For more legal considerations, check out some of our additional posts.  If you have any questions or concerns, reach out to us at Solutions Northwest Inc. and we can help. Solutions Northwest Inc. employs experts in personal injury, workers’ compensation, and family law. If you need our guidance, our legal experts are ready to guide you through the process.

Contact us today to make an appointment.

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Contact the Vocational Consultants at Solutions Northwest Inc. Below:

Multiple Locations

Corporate Office: 120 State Ave. NE #397
Olympia, WA 98501
Business Hours: 8am-5pm M-F
Corporate FAX: 360-866-4773

Seattle, WA


Olympia, WA


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