We know that people with disabilities, including traumatic brain injuries, will, generally speaking, earn less per year than non-impaired individuals and, just as importantly, will have a shorter work-life expectancy than their normal cohorts. Even when an injured person has returned back to work, there is still a high probability that that individual, over his or her work life, will have a shorter work life, earn less money and therefore will incur a loss in earning capacity.
In reviewing hundreds of vocational economic reports during my professional life, many economists utilize a negative discount rate which substantially reduces a plaintiff’s loss of future earnings. The discount rate is a comparison between the return on investment minus the rate of inflation. Where a rate of investment is greater than the rate of inflation, projected future earnings will be reduced by that discount rate. Many economists utilize this discount rate which, in an individual case, as indicated above, will reduce the projected future loss of earnings.
The vocational economic firm of Vocational Economics, based in Louisville, KY, and rather than utilizing a positive or negative discount rate, recommends that vocational economists utilizes a total offset, that is, that the rate of investment equals the rate of inflation. As Anthony Gamboa, Ph.D., M.B.A. explains, no one is able to forecast in the future what the rate of inflation or the rate of investment will be. Therefore, many economists look back historically and arbitrarily select a given time frame in order to project the future. Depending what time period is arbitrarily selected one could project either a positive or a negative discount rate. By utilizing a total offset, neither the plaintiff nor the defendant is harmed by the arbitrary selection. For a fuller discussion, one is urged to review the Vocational Economics website.