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Income Loss
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Earnings in the Lost Years

 

Estimating Loss of Income



One approach to the estimation of loss of income centres on estimates of earnings by level of education. Use of data on earnings by educational attainment, age, sex and place of residence as a basis for earnings projections is well supported by economic research. Research in labour economics has shown that these four variables are significant contributors to the statistical explanation of differences in earnings among individuals.


Career counselling information prepared by Human Resources Development Canada also indicates that education level is a major determinant of the array of occupations potentially available to an individual. The National Occupational Classification which was developed in 1993 classifies occupations by skill level. Each skill level is generally associated with particular levels of education, as outlined below:



Skill Level Education/Training
A University degree (bachelor's, master's, or postgraduate
B

Two to three years of postsecondary education at a community college or an institute of technology  OR
Two to four years of apprenticeship training  OR
Three to four years of secondary school and more than two years of on-the-job training, training courses or specific work experience

C One to four years of secondary school training OR
Up to two years of on-the-job training, training courses or specific work experience
D Up to two years of secondary school and short work demonstration or on-the-job training


The relevance of such a general approach is supported by a study conducted by the Canadian Labour Market and Productivity Centre (The Dynamics of Labour Market Adjustment in Canada, August 1989), which shows that many individuals change occupations and industries when they change employers. Given such occupational mobility, the general statistical picture by educational attainment should provide a useful perspective that is not tied to specific assumptions about an individual’s future occupational career path.


It should be noted that projections by educational attainment implicitly include a positive contingency that reflects future earnings increases that may be attained by shifting to more remunerative occupations during the middle years of a person’s working life. Projections that are restricted to a particular occupation do not include such effects, other than for possible job progression within the one occupational group.