Covid-19, Life Expectancy & Economic Damages

Forensic economics
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The Covid pandemic caused wrenching changes in our lives. It affected how we worked, shopped and socialized. Things are getting back to normal, though the U.S. economy is still feeling the effects of a hangover that’s involved inflation, supply disruptions and labor shortages.

Covid and Forensic Economics

Covid also created a genre of articles meant for analysts like me, on how to factor the realities of Covid into a forensic analysis. Most of the advice ranged from straightforward to obvious. For example, if 2020 was the last year in which an injured person earned income, and if her 2020 earnings were less than in previous years due to the pandemic, then 2020 might not be a good indicator of her future earnings.

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Or consider a company claiming that it was harmed by an unfair trade practice in 2019. Depending on the type of business, a forensic economist projecting future lost profit might need to make an adjustment to account for the possibility of temporarily lower (or higher!) profits in the pandemic years of 2020-21.

Life Expectancy and Life Tables

Covid’s effect on life expectancy was slightly more complex. Forensic economists working on personal injury and wrongful death cases make projections of future earnings, household services and medical expenses. We use either life expectancies or annual survival probabilities to determine how far into the future these projections should go.

The basic tool for this is the life table, a table of statistics relating to life expectancy and mortality for a given cohort of people. The one I typically use is produced by the Centers for Disease Control’s vital-statistics program. For a given age, the life table yields both the life expectancy of someone in that group and the probabilities of surviving to future ages.

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The standard life table is a “period life table,” which means that it’s a kind of snapshot of the population. The life expectancy of, say, a 40-year-old male assumes that he will face the same mortality risks experienced by each age cohort during the current year. Therefore, if there’s a surge of deaths among 75-year-old males that year, the life expectancy of our hypothetical 40-year-old is estimated by assuming that when he’s 75, he’ll face the same risk.

Lower Life Expectancy

When the life table for 2020 was released, many analysts noted that life expectancies were lower, after virtually no change in the preceding years. You probably saw stories about this in the news. The drop in life expectancy was the largest since World War II. The cause, of course, was the disproportionate number of Covid-related deaths among older people, which reverberated across all age groups. One researcher found that the life expectancy of a 20-year-old male in the 2020 life table was more than two years lower than in the 2019 table.

A Temporary Solution

The drop in life expectancy in the 2020 life table has led many forensic economists, including me, to set it aside and use the 2019 life table instead. My assumption is that for younger people, the risk of dying from Covid will most likely subside by the time they reach old age. For them, mortality risks are better represented by the 2019 table, which was based on data right before the pandemic. At some point, perhaps quite soon, the risk of dying from Covid will recede into the background of regular mortality risks.

I apply this solution carefully, which means not always. A recent case of mine involved a man who died in 2019 at age 70. I used the 2020 life table in that case precisely because if the man had not died, he would have entered the Covid era in his early 70s, which is right about when Covid’s death risks begin to rise.

The Covid pandemic changed many things. We’ve all had to adjust, and forensic economists are no exception. Perhaps the yet-to-be-released 2021 life table will return to normal. Perhaps it’ll take a few years. In the meantime, many forensic economists will be using this simple fix.

Dr. Andrew Brod

Dr. Andrew Brod is the president of Brod Forensic Economics in Greensboro, NC. Dr. Brod has worked as a forensic economist for 25 years and focuses on economic damages for both plaintiffs and defendants: lost earnings in personal injury and wrongful death cases, lost profits in complex commercial cases. He has also conducted other types of economic analyses. Dr. Brod is a senior research fellow in the Bryan School of Business and Economics at The University of North Carolina at Greensboro. He holds a Ph.D. in economics from the University of Minnesota and did his undergraduate work at the University of Illinois. Learn more about him at www.AndrewBrod.com.

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