equitable and consistent projections for Victims close to each other in age with otherwise
similar family and employment characteristics.
6. To better reflect contingencies that the Victims would have faced, all future earnings
amounts are adjusted for a factor to account for the risk of unemployment because lifetime
jobs are not representative of the modern economy. This adjustment is made because work-
life expectancies are based on years of expected workforce participation, which, as defined
by the Bureau of Labor Statistics, include periods an individual is either working or seeking
work. Historical unemployment rates were examined and a comparatively low reduction
factor of 3% was applied to presumed earnings to account for this risk.
6
7. Subtract from annual projected compensable income and benefits, the Victim’s share of
household expenditures or consumption as a percentage of income, using expenditure data by
income level obtained from “Table 2. Income before taxes: Average annual expenditures and
characteristics, Consumer Expenditure Survey, 1999,” published by the Bureau of Labor
Statistics (BLS). This subtraction is a standard adjustment in evaluating loss of earnings in
wrongful death claims because some amount of the income the Victim would have
contributed to the household would have been consumed personally by the deceased and not
available to other household members. A Victim's expenditures were calculated as a share,
based on household size, of certain expenditure categories. For married or single with
dependents, these expenditure categories include Food, Apparel & Services, Transportation,
Entertainment, Personal Care Products and Services, and Miscellaneous. For single without
dependents, Housing, Education and Health are also included.
7
For lower income categories
where total expenditures exceed income, expenditures were scaled to income, so as not to
reduce income for expenses potentially met by other forms of support. This approach was
intended to avoid a penalty to the claimant. Table 4 shows calculated consumption rates by
income bracket and for various household sizes.
In determining household size, children were assumed to remain in the household through
age 18. Consumption rates calculated using alternative techniques were considered but found
to produce higher personal consumption rates and were not ultimately used to determine
Victim’s household consumption offset.
8
Although the consumption rates determined from
BLS data actually represent household expenditures as a percent of before-tax household
income, the actual consumption reduction used to determine the Victim’s personal
expenditures was calculated as a percent of lower after-tax income, which significantly
reduces the resulting offset. In addition, the Victim’s consumption is determined as a share
of the Victim’s own earnings only, rather than the standard share of total household earnings.
earnings profiles indicate that peak real earnings typically decline at some point, in calculating life-cycle earnings
growth in excess of inflation and overall productivity adjustments for Victims, the Special Master has assumed
that peak earnings are maintained.
6
Application of individualized unemployment rates by age or occupation was infeasible and determined to be
unnecessary. An examination of trends in unemployment rates demonstrated that the 3% adjustment factor
utilized was low by historical standards.
7
Other standard expenditure categories sometimes included in litigation, namely Reading, Cash Contributions,
Alcoholic Beverages, and Tobacco Products, were excluded.
8
These alternative techniques included an analysis of BLS data on household expenditures reported by household
size, with expenditure categories allocated equally among household members or allocated according to the
methodology suggested by authors Robert Patton & David Nelson in their 1991 Journal of Forensic Economics
article, “Estimating Personal Consumption Costs in Wrongful Death Cases.”
7