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Assessment of Earning Capacity.

Michael Shahnasarian Tucson: Lawyers and Judges Publishing Company, 2001 219 pages, $49.95

Assessment of Earning Capacity by Michael Shahnasarian has an intriguing title, especially for any economist who has struggled with the very difficult concept of earning capacity. According to the preface, "My primary reason for writing Assessment of Earning Capacity is to share a measure of expertise, developed by conducting several thousand earning capacity assessments, that will, hopefully, advance the state of practice in what has been an important part of my life's work." Standardizing the methodology of evaluating disabled individuals is a task that is badly needed, both for vocational and economic experts. Economists have an interest in this topic because in many injury cases they must utilize the report of a vocational expert as a basis for their calculations. Confusion between these experts can hinder the successful presentation of a case.

After a brief introduction, the book spends two chapters examining the proper methodology when evaluating a client. Chapter 2 focuses on the interview process, standardized testing, and labor market research. Chapter 3 explores 14 factors that affect career development and how an injury can impact upon this career development. Some examples are demonstrated earnings history, phase of career development, career motivation, future career prospects, preexisting vocational handicaps, and acquired vocational handicaps. Chapters 4-7 cover such topics as acquired disabilities, the Americans with Disabilities Act, labor law cases (discrimination), and family law cases (divorce). The final chapter provides tips concerning how to prepare for a trial and provide testimony.

Assessment of Earning Capacity was in some respects a major disappointment for this reviewer, as I will explain in a moment. Nevertheless, despite the price, it was worth the cost. The main value of the book is that it lays out in great detail what a vocational expert should do to properly evaluate a client. For example, there is significant detail concerning what information should be obtained in the client interview and what kinds of tests are proper for different types of clients. There is also discussion concerning how the vocational expert should make use of labor market data as well as information obtained from family, friends, and other individuals who have knowledge of the plaintiff. There is also a strong emphasis upon the importance of future training as a consideration when estimating post-injury earning capacity. Some vocational experts "boilerplate" their reports and base their conclusions on a very superficial analysis of the plaintiff--often an analysis that consists of nothing more than a one- or two-hour interview. The book also contains numerous forms developed by the author, which systematize the collection of information, as well as excerpts from actual testimony. Nevertheless, there are some major problems with the book.

The most annoying problem was what may be termed "editor mistakes." These are mistakes that should have been caught by a careful editor. A few examples will suffice. There are references made to government publications that are not contained in the rather meager bibliography. A 13-page life care plan is included, but there is virtually no discussion of the plan in the main part of the text. Some of the figures are mislabeled, and some of the figures are not referenced in the text. Two of the pages (198 and 199) are repeated, and on p. 5 one finds the sentence "Can career development problems bee offset or mitigated?" (Emphasis added.) Such errors are annoying, distracting, and lower the reader's confidence in the quality of both the book and the publisher.

At a more general level, there are two areas where the book could have been improved, at least from the viewpoint of a forensic economist. Perhaps the biggest difficulty is that even though "earning capacity" is in the title, the concept is never systematically analyzed or distinguished from expected earnings. There is a brief definition given on p. 1, but after that the author simply assumes that its meaning is obvious. For example, as the author states on p. 54,
   "When analyzing a subject's work propensity, his or her proclivity for
   pursuing overtime work and supplemental employment (i.e., moonlighting)
   should be assessed. In some cases, lack of financial need, family
   commitments, or personal preferences may explain an individual's decision
   to pursue less than full-time, ongoing employment."


Does the author mean that if a person does not obtain extra work for the reasons cited (which are largely voluntary in nature), the potential extra work could be counted as part of earning capacity? As discussed in Horner and Slesnick (1999), the role of voluntary vs. involuntary reasons for decisions is an important one in distinguishing earning capacity from other concepts such as expected earnings.

The book's other major difficulty is that it does not resolve the problem forensic economists frequently face when interpreting the report of a vocational expert-namely, understanding how the expert arrived at the reduced earnings and work life expressed in the report. As an example,
   "Ms. Yoder will be fortunate to maintain employment offering between
   minimum wage and $7.00 per hour (present value) during her work life.
   Further, because of her acquired vocational handicaps, Ms. Yoder will
   sustain a future loss of earning capacity that will range between 10% and
   40% over the remainder of her work life." (p. 65)


The first sentence is straightforward and is based upon labor market research that specifies a certain range of jobs that the individual is capable of performing and that are available in the local community. However, the second sentence is a complete mystery. Is the 10% to 40% related to a further wage reduction? A reduction in expected work life? Presumably it is the latter, but that is not certain. In fact, the biggest controversy in the literature that involves both forensic economists and vocational experts-the use of disability tables--is not even mentioned in the book. Thus, one will have to look elsewhere for an explanation of how a vocational expert arrives at a reduced worklife expectancy.

Despite its shortcomings, Assessment of Earning Capacity is a useful book, especially for forensic economists who frequently must review the reports of vocational experts. Shahnasarian does a good job of specifying what the vocational expert should do, and thus the material can serve as a guide when reading the reports of other vocational experts. Unfortunately, though, there is little or no information regarding some of the major issues that concern forensic economists, such as how one should define earning capacity, how work life for the disabled should be assessed, or how the recent Daubert and Kumho Tire cases impact upon the methodology of forensic experts.

References

Horner, Stephen and Frank Slesnick, "The Valuation of Earning Capacity: Definition, Measurement and Evidence," Journal of Forensic Economics, 1999, 12(1), 13-32.

Shahnasarian, Michael, Assessment of Earning Capacity, Tucson, AZ: Lawyers & Judges Publishing Company, 2001.

Frank Slesnick, Professor of Economics, Bellarmine University, Louisville, KY.
COPYRIGHT 2001 National Association of Forensic Economists
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Slesnick, Frank
Publication:Journal of Forensic Economics
Article Type:Book Review
Geographic Code:1USA
Date:Mar 22, 2001
Words:1142
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