To summarize, the first stage in calculating
an appropriate award for lost earnings involves
an estimate of what the lost stream of income
would have been. The stream may be approximated
as a series of after-tax payments, one in
each year of the worker's expected remaining
career. In estimating what those payments
would have been in an inflation-free economy,
the trier of fact may begin with the worker's
annual wage at the time of injury. If sufficient
proof is offered, the trier of fact may increase
that figure to reflect the appropriate influence
of individualized factors (such as foreseeable
promotions) and societal factors (such as
foreseeable productivity growth within the
worker's industry).
It has been settled since our decision in
Chesapeake & Ohio R. Co. v. Kelly,
241 U.S. 485 (1916), that "in all cases
where it is reasonable to suppose that interest
may safely be earned upon the amount that
is awarded, the ascertained future benefits
ought to be discounted in the making up of
the award." Id., at 490.
The discount rate should be based on the
rate of interest that would be earned on "the
best and safest investments." Id.,
at 491. Once it is assumed that the injured
worker would definitely have worked for a
specific term of years, he is entitled to
a risk-free stream of future income to replace
his lost wages; therefore, the discount rate
should not reflect the market's premium for
investors who are willing to accept some risk
of default.
2.4.2 Valuing Certainty Equivalents