Essays in Forensic Economics: Exploring issues of Lost Earnings from Personal Injury and Wrongful death in South Africa

Abstract

Economic loss estimates are fundamental in providing compensation to victims in personal injury or wrongful death cases. Such estimates, calculated by forensic economists assist judges and lawyers to make evidence-based decisions on civil litigation matters. In particular, lost earnings estimated for vulnerable groups in society can provide financial or quantifiable compensation vital for the sustainability of the victim or surviving family members. Yet, there is an inadequate evaluation of personal injury and wrongful death cases in the South African courts, due to challenges, such as insufficient resources, expertise, and court procedural delays. In addition, this has led to the inaccurate assessment of civil litigation cases in the country. The impact is devastating, especially to vulnerable groups, who may rely on the court systems to provide fair and reliable economic loss estimates. The thesis estimates work life expectancies for four labour states and future lost earnings for workers in formal and informal employment in South Africa, with the use of the National Income Dynamics Survey (NIDS) dataset from 2008 to 2017. Work life expectancies were estimated using the Stochastic Markov-chain transition model whilst future lost earnings were estimated the using Benham-La Croix present value formulae. Work life expectancies are an essential component for estimating future lost earnings. The results showed that male and female workers who are in formal employment have higher work life expectancies and greater future lost earnings, when compared to male and female workers in the informal sector. Furthermore, the results revealed that informal employment is an important sector for women because they had longer work life durations, when compared to men. However, future lost earnings for women remain lower in the informal sector as compared to future lost earnings for men. The thesis showed the presence of racial disparities in the labour market—White population had the highest work life expectancies and future lost earnings as compared to the Black, Coloured and Asian/Indian populations in the formal sector. There is a need for policy makers to legislate specific policies that especially integrate women into the formal labour market, such as policies that create a sustainable work-life balance, such as subsidising child care activities or programmes to incentivise women to participate in the formal labour force. In addition, there is a need for the government to provide regulations and social protection to informal workers as well as promote skills development programmes for minority groups and anti-discriminatory policies in the work place. iv The thesis estimates personal consumption rates in wrongful death in South Africa for single female parents’ households using a method known as Krueger’s expenditure allocation approach. Personal consumption rates are important in estimating compensation in wrongful death for households as the proportion of income which is consumed by the deceased is removed from household income. The remaining income is then awarded as compensation to the surviving family members. For this analysis, the thesis used wave 5 data from the NIDS dataset. The results showed that as household income increases, personal consumption rates (PCRs) for a single female parent with one child and a single female parent with two children decrease. Furthermore, the thesis found that personal consumption rates for single female parents with one child were higher, as compared to personal consumption rates for single female parents with two children. The results also show that there were substantial differences in the personal consumption rates for low, middle, and high-income groups. There is a need for the government to provide more financial support programmes to assist single female parents, in particular, to sustain their families when they are alive or even when they wrongfully die. To understand the compensation which could be awarded to minor children in case of wrongful death or injury, the thesis estimated educational probabilities and expected lifetime earnings for minor children in South Africa. The study used an ordered probit model with cluster robust standard errors together with the educational-probability -weighted lifetime earnings model to estimate educational probabilities and expected lifetime earnings. In addition, the study used the child dataset section of the NIDS for wave 1 and wave 5. The results of the study showed that on average, children in South Africa are more likely to achieve lower educational levels, such as high school education, as compared to achieving higher levels of education, such as an honours degree or higher. Furthermore, the results showed that male and female White children are more likely to have the uppermost expected life time earnings, as compared to the expected life time earnings of children of other races for all family structures. These results imply the urgent need for government intervention in subsidising education even at higher educational levels. In addition, there is also a need for government to embark on social and economic programmes that will reducing the systemic and intergenerational income inequality in the country. In conclusion, forensic economics estimates provide a platform towards compensation for personal injury and wrongful death cases. This thesis provides new insights into compensation estimates, given the current limited scope of this area in developing countries and in South v Africa. Such economic loss estimates can prove to be vital for compensation especially to the vulnerable groups in society. The methodologies and estimates in the study may also assist the court systems to improve efficiency in civil litigation matters that involve personal injury and wrongful death cases.