An injury prevents you from working for twenty years. How much is that loss worth, in money? The instinctive answer is "my salary", but it is deeply wrong. If you earn 40,000 € a year, the loss is not 40,000 €: it is the sum of all the earnings you will not make, year after year, brought back to today's value. That number, for a 40,000 € earner who loses twenty years of career, is about 710,000 € — almost eighteen times the annual salary. It is the figure that almost everyone dramatically underestimates, and that in an injury lawsuit, a disability or an insurance claim represents the real economic loss. This calculator estimates the present value of lost earnings, taking into account the years lost, the degree of loss of earning capacity, the expected wage growth and the discount rate. It is parametric and international: it adapts to any income, currency and legal system.

What loss-of-earnings damage is

The loss-of-earnings damage ("lost wages" or, more broadly, "lost earnings" / "loss of earning capacity") is the economic value of the earnings a person will no longer be able to make because of an event — an injury, a disabling illness, someone else's fault — that reduces or wipes out their ability to work. It is not an abstract concept: it is one of the most important items of compensation in a personal injury lawsuit, an insurance claim or a disability assessment. It includes both the losses already suffered (the earnings missed from the event until today) and, above all, the future losses (the earnings that will not be made in the years to come). It is precisely the future component that makes the damage so large, and that requires careful calculation: one year's income is not enough, you must add up the entire lost working life and bring it to present value. This calculator isolates exactly that value.

Why the real loss is much larger than the annual salary

Here is the heart of the calculator. Those who suffer damage tend to think of the loss in terms of annual income — "I earned 40,000 € a year" — but the real economic loss is the sum of all the years of work lost. If you will not be able to work for twenty years, you lose twenty times that income (as a first approximation), plus the effect of the wage growth you would have had. Of course, those future earnings must be discounted to present value, because a euro in twenty years is worth less than a euro today; but even after discounting, the total remains an important multiple of the annual income. In the base case — 40,000 € a year for twenty years — the present value of the loss is about 710,000 €, that is almost eighteen years of salary, and the undiscounted sum approaches a million. It is an order of magnitude that surprises, and that explains why estimating the damage "by eye" on the annual income leads to hugely underestimating it. The calculator makes this number explicit.

How the present value of the loss is calculated

The calculation sums the earnings lost in each future year, grows them by the expected wage growth and brings them back to today with a discount rate. The first-year loss is the annual income multiplied by the percentage of loss of earning capacity (100% if you cannot work at all, 50% if you can earn only half). Each subsequent year this loss grows by the wage rate and is discounted. Mathematically it is the present value of a growing annuity: PV = A × [1 − ((1+g)/(1+d))ⁿ] / (d − g), where A is the first-year loss, g the wage growth, d the discount rate and n the years lost (when d = g you use A × n / (1+d)). The calculator returns the present value of the loss, the total undiscounted loss (for comparison), the first-year loss and the equivalent years of income — how many years of current salary the total damage is worth.

The present value by years of work lost

The table shows how the present value of the loss grows as the years lost increase, for a 40,000 € income with 100% capacity loss, 2% wage growth and 3% discount:

Two things stand out. First: the damage grows much faster than the annual income — already at ten years it exceeds 370,000 €, at twenty it exceeds 700,000. Second: the equivalent years of income are always lower than the years lost (17.7 versus 20, 25.4 versus 30), because of discounting: earnings far in time are worth less today. But the fact remains that a disability at a young age, with decades of work ahead, produces an enormous economic damage, on the order of a million euros and beyond. It is exactly why, in serious cases, the quantification of loss-of-earnings damage is entrusted to forensic economists. The calculator gives you the order of magnitude for your case.

The loss of earning capacity

A damage does not always wipe out the ability to work entirely: often it reduces it partially. A person who after an injury can still do a job, but less qualified or part-time, does not lose 100% of the income but a share. The calculator models this with the percentage of loss of earning capacity: at 100% the loss is the entire income (total work disability); at 50% it is half (you can earn half of before); at 25% it is a quarter, and so on. This is crucial because the real damage depends not only on the severity in itself, but on how much it affects the ability to produce income. Two people with the same income and the same residual years can have very different damages if one is totally unable to work and the other only partially. By entering the correct percentage, the calculator scales the damage accordingly. It is also how legal and insurance systems reason: in terms of degree of loss of earning capacity.

The present value by degree of disability

The table shows the present value of the loss as the loss of earning capacity varies, for a 40,000 € income over 20 years, 2% growth and 3% discount:

The relationship is linear: the damage scales in direct proportion to the capacity reduction. A disability that halves earning capacity produces half the damage of a total disability, for the same income and years. Even an apparently "modest" 10% reduction, however, over a whole career is worth almost 71,000 € at present value — not negligible. It is a reminder that even partial disabilities have a real and quantifiable economic value. The calculator lets you enter the exact percentage estimated for your case and see the corresponding damage. The precise determination of the degree of reduction, in practice, is up to specialized medico-legal assessments.

The role of the discount rate

The discount rate is the rate at which the earnings that would have been made in the future are brought back to today's value. The principle is simple: a euro you would have earned in ten years is worth, today, less than a euro, because today's money can be invested and grow. The higher the discount rate, the more the distant earnings are "scaled down" and therefore the lower the present value of the loss; the lower the rate, the higher the present value. It is one of the most debated variables in lawsuits, because even small differences produce important gaps over long horizons: over twenty years, going from a 3% rate to a 5% one can reduce the damage by more than 15%. Legal systems often use prudent "real" discount rates (net of inflation), sometimes set by official tables. The calculator lets you set the rate you consider appropriate, so you can see how much this choice weighs on the result.

The expected wage growth

In calculating the future damage, the wage growth that the person would presumably have had if they had continued working also matters. Incomes do not stay still: they grow over time through seniority increments, career advancements, inflation adjustments. Ignoring this growth underestimates the damage, especially for young people with long careers ahead. In the calculator, the annual wage growth increases each year's loss relative to the previous one. There is a close link with the discount rate: what really matters is the difference between discount rate and wage growth (d − g). If growth equals discount, the two effects cancel out and each year's loss is worth, at present value, as much as the first's. If discount exceeds growth (the typical case), the damage grows but less than proportionally to the years. The calculator also correctly handles the limit case where the two rates coincide.

Loss-of-earnings damage and non-economic damages

It is important to distinguish the loss-of-earnings damage, which this calculator estimates, from the other heads of damage. The loss-of-earnings damage is an economic (or "pecuniary") damage: it represents concrete money that will no longer come in. Alongside it, compensation for injuries generally also includes non-economic (or "non-pecuniary") damages: physical suffering, moral damage, loss of quality of life, biological damage. These are not calculated with a financial formula like lost earnings, but with different criteria (tables, equitable assessments, precedents) and vary a lot by legal system. The calculator deals only with the economic component of loss of earnings, which is, however, often the largest and most "objective" item of compensation. Keeping the two components separate is essential to understand what is being discussed: here we are talking about the value of lost earnings, not the price of pain.

How loss of earnings is valued around the world

The principle of compensating lost earnings is universal, but the terminology and methods vary by legal system. The table gives an international picture:

Beyond the names, the underlying logic is everywhere the same: you estimate how much the person would have earned without the damage, for the residual years of work, taking into account the share of capacity lost, and you bring it all to present value. The differences concern the details — which discount rates to use, whether to consider gross or net income, how to treat wage growth, which official tables to apply. Precisely because the basic method is universal, a parametric calculator is useful everywhere: enter the values suited to your system and get a consistent estimate. For the precise legal quantification, however, the criteria and professionals of the reference system are always needed.

Short-term lost wages and future loss of capacity

The term "lost wages" is used in two senses that are worth distinguishing. The first is the short-term loss of income: the days or months of work (and therefore of salary) lost during convalescence, after an accident from which, however, one fully recovers. It is calculated simply as daily or monthly income multiplied by the time of absence, and does not require discounting because it is past or imminent. The second, much more relevant economically, is the loss of future earning capacity: when the damage is permanent and reduces the ability to work for the years to come. Here the whole apparatus of present value, wage growth and discount rate comes into play. This calculator focuses on the second meaning — the most complex and the largest — but you can also use it for the short term by setting few years and the appropriate reduction. The distinction is important because the two components add up in the total compensation.

Taxation and the "gross-up"

A technical but relevant point is whether to calculate the loss on gross or net income (net of taxes). The logic is that the person could have spent only the net income, so the "real" loss would be the net one; in many systems, however, the compensation is in turn taxable or not according to specific rules, and corrections (the so-called "gross-up") are applied so that the net sum received compensates the net loss. The rules vary a lot by country and type of damage. The calculator uses the income you enter: if you want to reason in net terms, enter the net income; if in gross terms, the gross one. The correct choice depends on the reference legal and tax system and is one of the technical issues a professional must assess. The important thing is to be consistent and aware of which base you are using, so as not to compare different quantities.

Why it is needed in injury and disability claims

The estimate of loss-of-earnings damage is central in many concrete situations. In personal injury lawsuits (road accidents, workplace injuries, medical liability), it is often the largest and most contested item of compensation. In disability assessments, it serves to quantify the loss of earning capacity for annuities or indemnities. In insurance policies (accident, disability, life), it is the basis for determining ceilings and settlements. Even in personal and family planning, understanding how much your ability to produce income is worth helps size insurance coverage correctly. In all these cases, reasoning on the annual income alone leads to huge errors: the value at stake is the entire working life at present value. The calculator offers a quick and transparent estimate of this value, useful as a starting point for discussion or as a reasonableness check of an appraisal.

Common mistakes

Some typical mistakes. First: estimating the damage on the annual income rather than on the entire lost working life, underestimating it by an order of magnitude. Second: ignoring wage growth, which over long horizons significantly increases the damage. Third: using an arbitrary discount rate, without realizing how much it weighs on the result. Fourth: confusing gross and net, mixing different bases. Fifth: neglecting the partial reduction of capacity, treating as total a disability that leaves a residual capacity (or vice versa). Sixth: wrongly adding the economic damage to the non-economic damages as if they were the same thing. Seventh: forgetting any residual income or substitute benefits. The calculator helps above all against the first three, making explicit the present value, the role of growth and discounting, and the comparison with the annual income.

Precautions and warnings

Some important warnings. First: the calculator provides an order-of-magnitude estimate, not a legal quantification. The real damage in a lawsuit depends on many additional factors (residual income, welfare benefits, specific working life expectancy, local rules) that require an appraisal. Second: the parameters (years, growth, discount, reduction) must be chosen with judgment and, in a legal setting, according to the standards of the reference system. Third: the model uses constant growth and discount, a simplification with respect to reality. Fourth: the non-economic component of the damage (suffering, biological damage) is not included. Fifth: nothing here is legal, medical, insurance or financial advice. Use the calculator to understand the order of magnitude and the logic of loss-of-earnings damage, not as a basis for a claim or a decision. For a real case, turn to lawyers, medico-legal experts and specialized economists.

How the calculator works and the data you need

Enter the annual income (gross or net, consistently), the years of work lost (for a permanent disability, the years until the expected retirement age), the loss of earning capacity as a percentage (100% if you can no longer work, less if you retain a residual capacity), the expected annual wage growth and the discount rate. The calculator returns the present value of the loss (the key number), the total undiscounted loss (for comparison), the first-year loss and the equivalent years of income (how many years of salary the damage is worth). Try changing the years lost or the capacity reduction and watch how the present value grows well beyond the simple annual income: you will understand why quantifying the loss of earnings requires looking at the entire working life, not just one year.

Practical example: an injury at 30 is worth 900,000 €

Luca is 30, earns 35,000 € a year, and an accident leaves him with a disability that wipes out his ability to work. He had 37 years left until retirement age. His insurer offers compensation calculated "on the salary", proposing a few years' worth. Luca uses the calculator: with 35,000 € income, 37 years lost, 100% reduction, 2% wage growth and 3% discount, the present value of the loss of earnings is about 900,000 € — over 25 times his annual salary. The undiscounted sum would exceed two million. Luca understands that the offer based on "a few years" underestimates the damage by an order of magnitude: the value at stake is not one year's income, but the entire working life he will not have. And this is only the economic damage: suffering and biological damage are added separately. With these numbers in hand, he turns to a lawyer and a forensic economist for the precise quantification. The lesson is clear: loss-of-earnings damage must always be viewed at present value over the whole horizon, never on a single year.

Frequently asked questions

What is loss-of-earnings damage (lost wages)?

It is the economic value of the earnings a person will no longer be able to make because of an injury, a disabling illness or someone else's fault that reduces the ability to work. It includes losses already suffered and, above all, future ones. It is one of the most important items of compensation in injury lawsuits, disability or insurance claims.

Why is the real loss much larger than the annual salary?

Because it is the sum of all the years of work lost, not just one. If you cannot work for 20 years you lose about 20 times the income (plus wage growth), which even after discounting to present value remains an important multiple: for 40,000 €/year over 20 years it is about 710,000 €, almost 18 years of salary.

How is the present value of the loss calculated?

It is the present value of a growing annuity: PV = A × [1 − ((1+g)/(1+d))^n] / (d − g), where A is the first-year loss (income × capacity reduction), g the wage growth, d the discount rate, n the years lost. When d = g you use A × n / (1+d). It sums the future lost earnings and brings them to today.

What is the loss of earning capacity?

It is the percentage of income you lose from the damage: 100% if you can no longer work, 50% if you can earn only half, and so on. The damage scales in direct proportion: a disability that halves capacity produces half the damage of a total one, for the same income and years.

Why does the discount rate matter?

Because it brings future earnings to today's value: a euro in 10 years is worth less than one today. The higher the rate, the lower the loss at present value. It is much debated in lawsuits: over 20 years, going from 3% to 5% can reduce the damage by more than 15%. Legal systems often use prudent real rates.

Why does wage growth matter?

Because incomes grow over time (seniority, career, inflation): ignoring it underestimates the damage, especially for the young. What really matters is the difference between discount and growth (d − g). If they coincide, each year is worth at present value as much as the first.

What is the difference between economic and non-economic damages?

The loss-of-earnings damage is economic (pecuniary): concrete money not earned. Non-economic damages (suffering, moral/biological damage, quality of life) are calculated with different criteria (tables, assessments), not a financial formula. This calculator estimates only the economic component.

Is loss of earnings calculated the same way in all countries?

The principle is universal (present value of lost future earnings), but terminology and methods vary: "lost earning capacity" in the US, "loss of earnings" with Ogden tables in the UK, "lucro cesante" in continental Europe. The calculator is parametric: adapt the values to your system.

Should I use gross or net income?

It depends on the legal and tax system. The logic is that you can spend only the net, but the compensation may be taxable and corrections ("gross-up") apply. The calculator uses the income you enter: be consistent (net with net, gross with gross). The correct choice is up to a professional.

What is the difference between short-term lost wages and future loss of capacity?

The short term is the income lost during convalescence after an event from which you recover (days/months × income, no discounting). The future loss of capacity is when the damage is permanent and reduces capacity for the years to come: here present value is needed. This calculator focuses on the second.

Does the result count as a legal quantification?

No, it is an order-of-magnitude estimate. The real damage in a lawsuit depends on many factors (residual income, welfare benefits, working life expectancy, local rules) that require an appraisal. Use it to understand the logic and order of magnitude, not as a basis for a claim.

Does the calculator work for any country and currency?

Yes, it is parametric and international. Enter income, years lost, capacity reduction, growth and discount of your case and it adapts to any currency and system. Rates, tables and criteria vary by country: use the values of your reference system.

Is the result legal or financial advice?

No. It is an educational tool to understand the order of magnitude and the logic of loss-of-earnings damage. The non-economic component is not included, the model is simplified. For a real case turn to lawyers, medico-legal experts and specialized economists.

Updated July 2026