Worklife Expectancies in the United Kingdom based on Longitudinal Labour Force Survey Data, 1993-2003

In the legal system in England and Wales, the assessment of the future loss of earnings with respect to personal injury is based on the 'multiplier-multiplicand' method. In this simple framework, the role of the multiplier is to account for future uncertainties that might affect the length of time a person could be gainfully employed until final retirement. The loss-of-earnings multipliers for England and Wales are currently prepared by the Government Actuary's Department (GAD) in consultation with a multi-disciplinary working party, and are periodically published together with explanatory notes. This set of tabulated multipliers are simply referred to as the 'Ogden Tables'. The purpose of these tables is to provide scientific guidance to the courts in England and Wales in determining the value of the multipliers. However, the Ogden Tables are subject to the important criticism of being out-of-date in terms of both methodology and data in the valuation of the labour market risks. For this research project, the potential impact of dynamic multistate modelling and the use of the latest LFS data on the current multipliers was considered. A multistate Markov chain modelling framework was applied, which, in contrast to the previous static methodology of measuring workforce participation rates, represents labour market risks in terms of dynamic flows in and out of three basic economic states. <br> <br> Thus, individuals were classified by their economic activity as 'employed', 'unemployed' and 'out of labour force' (i.e. 'inactive') and the model then led to estimates based on the observed transitions between these states. Five-quarter LFS longitudinal datasets covering 1993-2003 were used, and worklife expectancy figures were computed, conditional on current economic state and age. Furthermore, the effects of additional factors on the worklife expectancies were quantified, such as region, industry, educational attainment and disability. The results demonstrated that the last two factors are the most critical in terms of future earnings. However, these factors are not currently included in the 'Ogden Tables' recommendations. In the context of damages for personal injury, it is particularly important to differentiate by disability, which is then used to interpret the results in terms of future earnings in the circumstances before and after the injury.<br> <br> <br> <br>