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To Use Or Not Use Race In Determining Economic Damages?

California Statue, SB-41, which became effective January 2020, prohibits “the estimation, measure, or calculation of past, present, or future damages for lost earnings or impaired earnings capacity from a personal injury or wrongful death from being reduced based or race gender and ethnicity.”  (Bold added.)

The law bases this prohibition on the principle of “equal protection;” that is, people cannot be treated differently because of immutable characteristics like race, gender, and disabilities.

Here is an example of the type of statistical data that SB-41 prohibits in the calculation of damages. You’ll notice there’s a significant difference in the projected earnings of different groups.

 

In 2017 dollars, for their “earnings lifetime:”

  • Asian and white men will earn approximately $3 million – the largest amount
  • Black men will earn approximately $ 2.2 million – just below the overall average
  • Hispanic women will earn roughly $1.7 million – the lowest amount.

With median earnings of white men as the base,

  • Asian men will earn 2% more than white men.
  • All the other groups will earn less.
  • Asian women will earn 85% of what white men earn; Hispanic women 36%.

Note the data reflects the past (1963-2017) labor market experience of the various groups. In other words, past discrimination would get “baked in” the calculation of damages during 2034-2084, the period in which a female child born in 2000 would be in the labor market. This “baked in” discrimination can be seen as denying the child “due process” by an assumption that past discrimination will continue.

In our Working Paper, we discuss four options: (i) Create and use an explicit discrimination factor, (ii) Use the “All persons all races” earnings for everyone; (iii) Use the median earnings for those who are below it; (iv) Use the highest level of earnings.

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