Earning Capacity vs. Lost Earnings: What's the Difference?

Lost earnings are the wages, salary and other pay for work that a person did not receive because of the injury, less anything the person earned in the same period; they are also called lost wages or lost income. For the time already past, the figure is read from documents: pay stubs, W-2 forms, tax returns and employer records, with employer-paid benefits such as health coverage and retirement contributions included where the records support them. That past period ends at the valuation date the report names, a date such as the trial date. Once the records are complete, the past figure is largely arithmetic, and either side can retrace it line by line. The category need not stop at the valuation date: California's civil jury instructions, for example, have the plaintiff prove past lost earnings as the amount lost to date and future lost earnings as the amount the plaintiff will be reasonably certain to lose in the future because of the injury (Judicial Council of California, 2026). For a self-employed or gig worker the earnings record is built from tax returns and business documents, and the self-employed claimants guide explains how they are read.

Lost earning capacity, also called loss of earning capacity or diminished or impaired earning capacity, is the reduction in a person's ability to earn money because of the injury, whether or not the person was using all of that ability before it. California's civil jury instructions value the loss by comparing what it is reasonably probable the person could have earned without the injury with what the person can still earn with it, state that a work history is not necessary, and quote an appellate decision: "Impairment of the capacity or power to work is an injury separate from the actual loss of earnings" (Judicial Council of California, 2026). The capacity itself is measured with vocational evidence. A vocational expert reads it from education, training, skills, work history and the labor market, using published occupational and wage data (U.S. Bureau of Labor Statistics, n.d.; National Center for O*NET Development, n.d.), once for the person's profile before the injury and once for the profile after it, within the documented restrictions. The loss is the gap between the two. Because the capacity is read from more than pay, a short or empty earnings record does not rule out a loss; the profile before the injury then rests on the education, training and careers reasonably open to the person.

Yes, where the forum allows both and each covers a different loss. A personal injury whose effect on work outlasts the valuation date can carry a documented lost earnings figure for the time before that date and a projected loss for the time after it, valued as future lost earnings or as lost earning capacity according to the forum's law and the record. The two must not count the same loss twice; where a claim includes both future lost earnings and lost earning capacity, California's instructions, for example, direct that the verdict form ensure the same loss is not computed under both standards (Judicial Council of California, 2026). Lost earnings remain the starting point in any case with a wage history. The capacity measure carries more of the claim when that history understates what the injury took: work that was seasonal or episodic, a person who was underemployed or between jobs, a career whose growth the injury interrupted, or restrictions that close whole groups of occupations for the rest of the working life. Take a hypothetical carpenter injured two years before trial who returns to lighter work at lower pay. The pay missed and reduced over those two years is lost earnings, read from the payroll records. The future loss is the gap, over the remaining working life, between what the carpenter could have earned without the injury and what the carpenter can still earn within the restrictions, which the lighter work's pay informs but does not settle; the vocational opinion sets that gap and the economist projects it. Attorneys confirm the governing rule for their case.

Earning capacity can also be the question with no lost earnings claim at all. In a divorce or support case a vocational opinion states what a spouse could realistically earn, and whether income is imputed, and at what figure, is the court's determination; the divorce and alimony guide describes that engagement.

The past pay loss is a forensic economist's calculation from the records, and earning capacity is a vocational expert's opinion, which the economist then carries into the projection of the future loss. The vocational expert states the capacity before and after the injury as wage ranges, naming the occupations and the data behind each; the economist extends the gap over the person's worklife expectancy, adds the lost benefits and discounts the future years to present value. When the ability to work is disputed, the projection rests on the vocational opinion, and the two reports share one set of facts: the same date of injury, the same restrictions and the same valuation date. When what the person can still earn is not in dispute, an economist can total a documented wage loss without a vocational opinion. Kincaid Wolstein Vocational and Rehabilitation Services (KWVRS) prepares the vocational earning capacity opinion for plaintiff and defense counsel, applying the same method whichever side retains it. KWVRS provides forensic economic analysis with its affiliated firm, Kincaid Wolstein Economics. The economic damages expert guide explains which of the three damages disciplines a matter needs.

Lost earnings appear in the economist's report as a schedule, and lost earning capacity begins in the vocational expert's report as two wage ranges that the economist's report then projects. The schedule lists the period of disability, the earnings the record shows for the comparable period before it (pay stubs, W-2s and tax returns, with fringe benefits added where the employer's records support them), any earnings actually received during the period, and the difference. Every line traces to a document, and the finder of fact can check the arithmetic. The two capacity ranges are what the person could earn before the injury, read from the education, training, earnings history and occupations held, and what the occupations still open within the restrictions pay in the person's labor market, from published wage data (U.S. Bureau of Labor Statistics, n.d.). The economist's report then takes those ranges as inputs, projects the difference over the working life and reduces it to present value. Reading the economist's capacity figure without the vocational report behind it is reading a conclusion without its evidence. When a case carries both measures, the reports divide the loss at the valuation date: the schedule carries the documented loss from the injury to that date, and the projection, valued as future lost earnings or as lost earning capacity as the forum's law and the record allow, carries the years from that date to the end of the working life, so the two meet at one date and no year is counted twice. The damages calculation explainer works a hypothetical through both periods, and the damages estimator gives a planning-level figure from counsel's own inputs.

Counsel frames it as one of two questions, or both, and the choice decides which measure the case produces: what the person did not earn, or what the person can no longer earn. An economist answers the first with lost earnings, from the payroll and tax records, the dates of disability and any return to work; the second calls for a vocational expert first when the occupations the restrictions leave open are disputed, and the economist second, to project the difference. Plaintiff counsel frames the capacity question when the pre-injury earnings understate what the person was on course to earn; defense counsel frames it when the claimed loss assumes the person can do nothing at all. Both framings call for the same two reports. Timing follows the framing: the vocational evaluation is scoped first, the economic projection is scoped to start when the capacity opinion is served, and both are scheduled against the disclosure deadline. The earning capacity evaluation explainer describes the vocational evaluation itself, and the RAPEL guide shows how that opinion is organized.