Keith Vodden Dr. Douglas Smith - Transports Canada

APPENDIX C: THE VALUE OF HUMAN CONSEQUENCES USING
DISCOUNTED FUTURE EARNINGS
For the most part, the methods used here follow those applied by Ted Miller and
described in Appendix D of the 1994 final report. Where more recent or improved data
were available, the methods exploited them. Where previous results seemed questionable,
the calculations were revised to bring the results into line with reasonable expectations.
Some parts of the description that follows have been taken from the Appendix D referred
to above. The application of the methods described here occurs in a spreadsheet file
called “Discounted Future Earnings.xls”.
A. DISCOUNTED FUTURE EARNINGS AND LOST HOUSEHOLD
PRODUCTION
Losses are measured for foregone future earnings in three main types of case:
fatalities, permanent disabilities (total and partial), and temporary disabilities and injuries.
Fatalities cost people future earnings in the form of their expected wages, fringe
benefits, and household production for the lifespan that a life table suggests lay before
them in the absence of their fatal collision. Permanent total disabilities have the same
effect (although average losses differ because the age and sex distributions for fatal and
nonfatal injuries differ). Permanent partial disabilities are assumed to cost an average of
17% of lifetime earnings (Monroe Berkowitz and John Burton Jr., Permanent Disability
Benefits in Workers’ Compensation, Kalamazoo MI: W.E. Upjohn Institute for
Employment Research, 1987).
Probabilities of permanent disability are applied to the numbers of major, minor,
and minimal injuries. These probabilities were taken from U.S. data (Ted Miller, Nancy
Pindus, John Douglass, and Shelli Rossman, Nonfatal Injury Incidence, Costs, and
Consequences: A Data Book, The Urban Institute Press, published in early 1994), as
follows:
Total Partial
Hospitalized .0162 .1493
Other Med Treated .0006 .0115
MTO defines hospitalized injuries as major injuries. Other medically treated
injuries closely resemble MTO’s minor-injury category. Injuries not treated at hospital
are MTO minimal injuries. We assign one-half the probability of total and partial
permanent disability of other medically treated injuries to this group. Our assumption is
that some injuries, including neck and back injuries, may not be immediately apparent.
TNS Canadian Facts, Social and Policy Research 167