Earnings Capacity

Earnings Capacity - 


 * Earning capacity is sometimes presented as an alternative to “expected earnings.” An individual worker’s earning capacity represents the earning potential of a worker, whether or not the worker chooses to earn at that full potential. A worker who could easily find a job in as a machine repairman at $30,000 per year, but works as an artist at $15,000 per year, has an earning capacity of $30,000, but expected earnings of $15,000. In addition to this difference based on annual earnings, earnings capacity is also distinguished from expected earnings in regard to the length of working life. A person may leave the labor force for voluntary reasons (attending school, child rearing, retirement) or for involuntary ones (unemployment, illness, death). Both causes are taken into account in estimating expected earnings, whereas only the involuntary reasons are taken into account in estimating earning capacity.


 * From: http://www.umsl.edu/divisions/artscience/economics/ForensicEconomics/definitions.html