PiReports.ca personal injury reports are prepared in accordance with generally applied forensic economics methodology. This section is a summary of the methods used by PiReports.ca to calculate economic damages.

• LOST EARNINGS VALUATION METHODOLOGY

The methodology, used in the calculation of lost earnings, is based on human capital theory. Human capital theory states that productive capabilities of persons stem from their stock of human capital. A person's human capital consists of attributes that enable an individual to be productive. These attributes include health, physical stamina, education, work experience, and training. An individual's earnings are directly related to his or her stock of human capital. A valuation of a plaintiff's lost earnings is in essence a valuation of one's productive capabilities.

A plaintiff's worklife is the statistically estimated amount of time a person is expected to remain employed. These future earnings are then discounted and summed to arrive at a present value amount of lost earnings. The future earnings are discounted because future dollars amounts are worth less in present day dollars. By virtue of discounting the future earnings amounts, the process of investing a lesser monetary amount to replicate the future lost earnings is modeled. The following example will illustrate how a monetary award can be invested to replicate future lost earnings. 

• LOST EARNINGS VALUATION FOR AN EMPLOYED PERSON

Assumptions:	Future lost earnings are calculated for 3 years.
	Future earnings are discounted at 2.5%.

Year	Lost Earnings	Present Value
1	$24,000	$23,712
2	$26,000	$25,064
3	$28,000	$26,204
Totals	$78,000	$75,100

The present value amount is lower than the sum of the future lost earnings because, in computing the present value, the lost earnings in each future year have been adjusted for the time value of money. Since the lower present value amount will be invested to earn a return equal to the discount rate, it will increase and be sufficient to replicate the future lost earnings. The following example will demonstrate how an award of $75,100 will be sufficient to replicate the lost earnings of $78,000. Note that the effective annual rate is 1.875% as the annual amounts are valued at mid year - not the year end when the rate would be 2.5%. 

Year	Beginning Balance	+	Interest Earnings	-	Lost Earnings Payment	=	Ending Balance
1	$75,100		$1,408		$24,000		$52,508
2	$52,508		$985		$26,000		$27,493
3	$27,493		$507		$28,000		$0

The preceding chart illustrates that the present value award will be sufficient to replace the future lost earnings. There is no windfall to the plaintiff after the lost earnings period. 

• LOST EARNINGS FOR MINOR OR YOUNG PERSON WITH NO EARNINGS HISTORY
In cases involving lost earnings to a minor child or a young person with no earnings history, PiReports.ca provides the user the necessary statistical data to consider future earnings increases attributable to human capital acquisition. The human capital factors generally considered in the analysis of future earnings for a young plaintiff, with no history are, gender, age, and education. The use of such data enables forensic economists to consider the effects of gender, training, and work experience on future earnings. PiReports.ca personal injury reports use cross sectional statistical data that provide median earnings based on gender and education. 

• VALUATION OF HOUSEHOLD SERVICES - LIFE EXPECTANCY LESS 5 YEARS

Household services represent routine chores performed in a household such as cooking, cleaning, and lawn maintenance. The time period of life expectancy less 5 years recognizes that not all persons complete household services to an advanced age. 

• VALUATION OF FUTURE MEDICAL EXPENDITURES - TO LIFE EXPECTANCY

The present values of future medical expenditures are calculated in the same manner as household expenses. Historically, the medical cost component of the Consumer Price Index has increased relatively more rapidly the inflation in general. Increasing future medical expenditures at an expected rate of inflation provides a conservative but workable estimate of economic damages attributable to future medical expenditures.