Discrimination in Earnings Analyses by Jamie T. Haven and Brian P. Brinig
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overnor Newsom approved Senate Bill No. 41 adding §3361 to the California Civil Code on July 30, 2019. §3361 states: “Estimations, measures, or calculations of past, present, or future damages for lost earnings or impaired earning capacity resulting from personal injury or wrongful death shall not be reduced based on race, ethnicity, or gender.” The purpose of the bill was to stop the use of statistics that incorporate racial, ethnic and gender biases when calculating damage awards in civil litigation matters. The consequences of this well-intentioned law raise practical questions for the courts, lawyers and economic experts who rely on statistics to calculate losses. Forensic economists regularly rely on statistical tables that report earnings, work life expectancies, life expectancies and other data to calculate the estimated losses of individuals in disputed matters. The economic expert typically compares the subject of the analysis to the most comparable peer group within a set of statistics to draw conclusions about the subject’s anticipated earnings (or other metrics). Many existing studies set forth observed data based on various demographic characteristics, including age, gender, education, race, and workforce participation. Some of these categories are immutable characteristics and others include immutable characteristics such as gender, race and ethnicity. The policy of the new law is an understandable attempt to rectify past biases and discrimination. No one supports discrimination based on an immutable characteristic of an individual. However, the implications of not calculating an individual’s damages based on his or her actual life situation presents some illogical inequities when attempting to calculate “unreduced” damages. The Lawyers’ Committee for Civil Rights Under Law published an article entitled How Race, Ethnicity, and Gender Impact Your Life’s Worth: Discrimination
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Attorney Journals Orange County | Volume 188, 2021
in Civil Damage Awards in 2018 which cited several instances of bias in damage awards in cases throughout the country. The Committee stated that gender- and race-specific earnings tables “Preserve systemic and structural inequalities, reinforce current pay gaps and workforce discrimination, and fail to account for possible progress.” The earnings tables referenced in the article are published by the United States Census Bureau and rely on information provided in the Bureau of Labor Statistics Current Population Survey. The Survey provides a variety of personal income tables that delineate income based on multiple variables, including but not limited to marital status, educational attainment, work experience and classification of worker. One method of estimating an individual’s lost income is reliance on the Survey tables for personal income by educational attainment, which range from less than 9th grade through a doctorate degree. Data is provided for males, females and both sexes. For each gender category, there are tables for “all races,” “white,” “black,” “Asian,” “Hispanic” and other ethnicities. Compliance with the new law requires the forensic economist to decide which income table will not reduce damages as a result of race, ethnicity or gender. If use of the table fitting a plaintiff’s specific characteristics results in a lower dollar amount of damages, is the plaintiff being discriminated against? Many personal income tables for females and minorities report lower income than similar tables for males and non-minorities. However, the calculation of “unreduced” damages is more complex than simply using data for white males. In the tables for income by educational attainment, there is not one ethnic group with data consistently higher than all the others, particularly as the level of educational attainment increases. “White alone, not Hispanic” males with a high school diploma working full-time, year-round, have higher mean earnings than all other equivalent
