Introduction

In many legal jurisdictions, personal consumption (the amount of money used by a person for his or her own living expenses) is relevant to the calculation of wrongful death damages. Utilizing microdata from the Consumer Expenditure Survey (CEX), this paper presents a new approach to estimating personal consumption specific to single persons who live alone. The personal consumption estimates presented here can be used to evaluate the economic damages incurred due to the death of minor or adult children or parents who lived alone.

The paper begins with a review of the various economic loss measures related to the death of a single person. Existing empirical estimates of personal consumption relevant to single persons are criticized as being insufficient to the variety of damages specifications across legal jurisdictions; in response, new personal consumption concepts are presented. The paper ends by providing empirical personal consumption estimates derived from microdata from the 2005–09 CEX's for males and females by earnings status and income level (with and without the inclusion of income taxes).

Personal Consumption Regarding the Single Person

In 1999, Parker Cashdollar called for more research regarding personal consumption in one-person households. Cashdollar stated that

A review of the literature regarding the personal expenditure deduction, as well as research in general on lost earnings, indicates that the primary focus has not been on the one-person household but on the more typical multiple-member household. The one-person household is an enigma, a special case, and one the plaintiff's expert economist does not relish. (p. 481)

The wrongful death economic loss of a married person is built upon the foundational evidence of the decedent routinely sharing his/her income with his/her family. In contrast, because the single-person decedent lived apart from his/her survivors, little of his/her income was likely shared with the survivors before the death.¹ In the case of a wrongful death of a single person, damages originate from the loss of the economic benefits flowing from the decedent to his/her survivors. Since such benefits are usually not parameterized by evidence existing before the death, the role of the forensic economist is to provide scientifically-based estimates of the decedent's expected earnings and personal consumption needs which are related to, but do not define, the ultimate damages suffered by the survivors.

Cashdollar focuses on three complications in determining the economic loss due to the death of a single person: (1) does the economic loss exist to the decedent's legal estate or to the survivors of the decedent (or both); (2) should economic loss be based upon the decedent's “maintenance or subsistence” living expenses or all of the decedent's living expenses; and, (3) should economic loss measure the standard of living lost by the survivors based upon dependency evidenced before the death, or the contingent losses that could exist to the survivors in the event of possible dependency? While whether economic loss exists solely to the estate or to the survivors (or both) is a legal question, Cashdollar points out that large variations in forensic economic opinion can exist based upon the expenditure components within the personal consumption deduction. Those varied opinions have not been narrowed to date in the literature; predecessors to Cashdollar which discussed the variations are Depperschmidt (1991), Lewis (1992), and Rodgers and Thornton (1999).

Across legal jurisdictions, there are at least five approaches used to determine the economic losses due to the death of a single person. The first approach (e.g., Kentucky, see Slesnick and Mulliken, 2004) ignores personal consumption and damages are set to the “sum of money that will fairly compensate [the decedent's] estate for the destruction of his power to earn money.” (p. 259) The second approach (e.g., Pennsylvania, see Rogers and Thornton, 2002) deducts from the expected earnings of the decedent the probable cost of the decedent's maintenance which includes “only the necessary and economical living expenses, such as food, shelter and clothing, that the decedent would have been required to spend in order to maintain life.” (p. 343). The third approach (e.g., Tennessee, see Cashdollar et al., 2006) deducts from the expected earning capacity of the decedent

. . . the present cash value of the deceased's living expenses had the deceased lived. These living expenses are those that under the deceased's standard of living would have been reasonably necessary to keep the deceased in such a condition of health and well-being as to maintain the capacity to earn money. (p. 343)

The fourth approach (e.g., New Jersey, see Tinari and Kucsma, 2010) implies a broader measure of personal consumption that is in excess of maintenance and standard of living and deducts from the expected earnings the “decedent's own personal expenses… [those that] were necessary for his/her own use, maintenance and personal needs.” (p. 228) The fifth approach (e.g., Florida, see Williams, 2002) requires separate accounting of the loss of support to survivors and the net accumulations to the decedent's estate. Net accumulations are defined in the Florida Wrongful Death Act (Florida Statutes, Chapter 768, 2008, p. 1) as

. . . the part of the decedent's expected net business or salary income, including pension benefits, the decedent would have retained as savings and left as part of his estate if he had lived his normal life expectancy. “Net business or salary income” is the part of the decedent's probable gross income after taxes, excluding income from investments continuing beyond death, that remains after deducting the decedent's personal expenses and support of survivors, excluding contributions in kind.

In the net estate accumulation jurisdictions, the loss of support to survivors, “by interpolation, is the decedent's probable gross income less the decedent's taxes, personal expenses, and net accumulations to the estate.” (p. 359)

Compounding jurisdictional approaches numbered three through five is the distinction between “reasonably expected pecuniary loss” and “contingent pecuniary loss,” or the “deprivation of the pecuniary benefits which the beneficiaries might have reasonably received if the deceased had not died from his injuries” [which is actual loss] or “compensation for the loss of any pecuniary benefit which would reasonably have been derived by (the survivors) from the decedent's earnings” [which is contingent loss]. (Michigan Central Railroad Company vs. Vreeland, 1913, pp. 70, 73) Because the survivors and legal estate face a trier of fact only once, the loss of any pecuniary benefit is necessarily argued by the plaintiff as compensable (or evidence that the trier of fact should hear in making their determination of damages). In many jurisdictions when wrongful death cases involve single persons (especially in the cases of the death of children), the fact that the decedent was not providing financial support to his survivors at the time of death does not bar the survivors' claim to a loss of pecuniary benefit of anticipated financial support.² Contingent loss estimates provide the trier of facts with an estimate of what financial support (and net accumulation) could be lost due to the death, not necessarily what support was actually lost measured by evidence available before the death. Courts recognize contingent losses through the guidance that determining wrongful death pecuniary damages

. . . inherently involves some element of speculation and intangibles. An award is not based on direct, positive evidence but upon probabilities which the jury must reasonably find. The jury has an extraordinarily wide discretion in determining the amount of recovery in such wrongful death cases. (Cobb v. State Sec. Ins. Co., 1979, p. 739)

All wrongful death damages which are empirically measured by earnings less personal consumption (where personal consumption is less than earnings) include contingent losses because forensic economists are unable to measure whether or not the survivors or estate will receive that pecuniary amount, only that it could be available to them. The role of the forensic economist is to measure specific contingent losses by considering which of the decedent's expenses could possibly benefit the survivors (e.g., a survivor could benefit by the decedent's expenses for shelter and transportation) or the decedent's legal estate.³ It is left to the trier of fact to utilize that information in determining damages.⁴

Existing Published Estimates of Single-Person Personal Consumption

A review of the forensic economic journals and elsewhere reveals only two recently published sources for single-person personal consumption data: the Patton-Nelson series of papers and the estimates published by the U.S. Department of Justice as a part of the September 11^th Victim Compensation Fund. Both studies include contingent losses because neither study specifically identifies whether or not the survivor or estate would be the beneficiary of the residual of earnings less personal consumption. The series of NAFE surveys performed by Brookshire and Slesnick asked questions about personal consumption calculations. It appears from supplied answers that instead of using published personal consumption data, many forensic economists construct their own personal consumption data utilizing the CEX which is published by the Bureau of Labor Statistics. Forensic economists also reported in the survey that they rely on other measures which could be relevant to wrongful death damages such as the study of intergenerational monetary transfers or personal estate savings rates.

Patton-Nelson

The Patton-Nelson series of estimates began in 1991 with their analysis of 1986–87 CEX published data tables; the latest edition analyzes 2005–06 CEX published data tables (Ruble, Patton, and Nelson, 2009). Throughout their entire series, the two Patton-Nelson single-person personal consumption estimates have been constructed according to the equations shown in Table 1. The Ruble-Patton-Nelson (RPN) 2005–06 single person personal consumption estimates are shown in Table 2.

Table 1 Patton-Nelson Definitions of Single-Person Personal Consumption

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Table 2 Ruble-Patton-Nelson 2005–06 Single Person Personal Consumption Rates (Consumption as a % of Income)

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Despite Patton-Nelson's statement on page 236 of their 1991 article that their personal consumption deductions “should be taken out of income when computing the economic loss to the estate,” many forensic economists use the Patton-Nelson estimates to compute economic losses to survivors who have different losses than does the estate. With their exclusion of pension and Social Security expenditures from consumption, the Patton-Nelson estimates require forensic economists to follow their method of computing economic losses pre- and post-retirement.⁵ When the ages of the survivors greatly exceed those of the decedent (e.g., in the case of the death of a child), it is highly unlikely that decedent's payroll deductions for pensions and Social Security would be relevant to the survivors' losses. Nevertheless, forensic economists utilizing Patton-Nelson estimates (and not making an adjustment for payroll deductions) risk including empirical estimates of payroll deductions as economic losses to survivors. In both of the Patton-Nelson definitions, also awarded to the survivors are the decedent's income taxes, net savings/investment, and repayment of debt principal.⁶ Many jurisdictions hold that income taxes are a forbidden topic to damages computation, so forensic economists are sometimes forced to ignore their reality. The Patton-Nelson “Definition Two” adds the decedent's expenditures on “durable goods” which are defined by Patton-Nelson as expenditures for vehicle purchases and household furnishings and equipment. Under a loss to the estate valuation, it is reasonable to assume that the estate would contain annual additions to savings plus annual investment returns. Annual debt service for mortgages may or may not be present at death based upon property condition and the real estate market. Due to depreciation it is not reasonable to assume that the full purchase price of durable goods would be present. Under a loss to the survivor valuation, it is reasonable to assume that the survivors could have access to savings and use of property and durable goods purchased. The Patton-Nelson personal consumption methodology predicts that the single-person estate suffers no loss when household income is below $20,000.

September 11^th Victim Compensation Fund (VCF)

To compute personal consumption, the U.S. Department of Justice data utilized the 1999 CEX published data tables as published by the Bureau of Labor Statistics. Expenditure categories related to VCF personal consumption amounts included Food, Apparel & Services, Transportation, Entertainment, Personal Care Products and Services, Miscellaneous, Housing, Education and Health. Excluded from VCF personal consumption were Reading, Cash Contributions, Alcoholic Beverages, and Tobacco Products. For lower income categories where total expenditures exceed income, expenditures were scaled to income so as not to reduce income for expenses potentially met by other forms of support. Unfortunately, the Justice Department did not publish enough detail to allow complete replication of its results. The VCF single-person personal consumption rates are shown in Table 3. Despite taking different approaches to determine personal consumption, at income levels greater than $30,000, the VCF and Patton-Nelson Estimate Two personal consumption rates are similar in size. The political decision by the Justice Department to scale expenditures where household income was less than $30,000 created economic losses for all victims/claimants.

Table 3 September 11^th VCF Single Person Personal Consumption Rates (Consumption as a % of Income)

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Single-Person Personal Consumption Components

The single-person personal consumption literature points to a need to group single-person's expenditures into components flexible enough to compute a variety of measures relevant to personal consumption and economic loss determination. For example, in legal jurisdictions requiring a maintenance deduction, we need an estimate of necessary living expenses at an economical income level. In jurisdictions requiring separate loss estimates for the survivors and the estate, estimates of direct support, sharable-expenses and asset accumulation are required. The titles of macro expense groupings useful in computing various measures of single-person personal consumption are shown in Table 4. “Personal expenses” are those intended to directly benefit the decedent and are essentially non-sharable. Classic personal expenses applicable to any household size are food, clothing, and medical expenses; however, in the case of a single-person household, the personal expense concept broadens into items that could be shared in a multi-person household. For example, in a single-person household the expenditures for luggage are realistically thought of as personal expenses because the intent of purchase is for self-use. In a family, the luggage may hold several persons' belongings or is used at different times by different family members. “Shareable expenses” are those with capacity to produce direct benefit to others. For example, the decedent's expenditures for an automobile or home could be shared with survivors. “Support to others” are those expenditures made by the decedent specifically for the consumption of others (e.g., gifts and life insurance). “Estate accumulation” represents a lifetime of financial savings and investment in marketable assets (e.g., stocks, bonds, and home ownership).

Table 4 Expenditures by Personal Consumption Grouping

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Expenditure Data

The data source favored to compute personal consumption has been the CEX as published by the Bureau of Labor Statistics (BLS). Both the Patton-Nelson and Justice Department estimates originate with BLS published reports of CEX survey data. Several critical problems arise with the use of the BLS published reports regarding single-person households. First, and foremost, the BLS published reports are for all single-person households by income level without regard to wage-earnings status. The economic literature has demonstrated life-cycle consumption patterns and since personal consumption is measured against wage earnings, the relevant sample of persons studied would be wage earners. In the 2005–06 CEX data utilized by (RPN), 40% of the persons representing one-person household were non-wage earners with an average age of 68.7. Second, the BLS published reports used by RPN do not consider gender.⁷ In Table 5 of this paper, we show the 2005–06 personal consumption estimates one and two as derived by RPN and comparable estimates constructed under their methodology had they considered gender. In the RPN approach, some large differences between male and female personal consumption rates are observed at incomes greater than $15,000. Third, the BLS published reports condense over 700 detailed expenditures to 74 major classifications constraining the ability to divide expenditures into personal, sharable, and support to others expense groups. Fourth, whenever two or more persons live together but keep their finances for food and living expenses separate, the BLS published reports places each of those persons into the single-household grouping as used by RPN. For example, when two persons live together and share the rent and utilities, but purchase their personal expenses separately, they are each counted as a member of a single-person household.

Table 5 Personal Consumption Estimates by Gender in the Manner of Ruble-Patton-Nelson, 2005–06

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This paper provides the first use of CEX microdata (survey years 2005–09) to provide personal consumption estimates for single persons by work status and gender. Domiciles containing more than one person are deleted. Instead of relying on summary expenditures, all 700+ micro-expenditure items within 35,284 studied CEX Interview and Diary single-person respondents are incorporated into the analysis. Expenditures and income in 2005 to 2008 were inflated to 2009 dollars using the Consumer Price Index.

From each single-person household surveyed, the CEX microdata presents (a) the titles of items purchased; (b) whether the items were consumed by the person or were gifts to persons outside the home; (c) the cost of the items including sales taxes; and, (d) various demographic information about the household member. Expenditures in the CEX for goods and services include excise and sales taxes and exclude purchases or portions of purchases directly assignable to business purposes. Excluded are periodic credits or installment payments on goods or services purchased before the survey period—the full cost of each purchase is recorded on the date of purchase even though full payment may not have been made. Refunds are recorded as negative expenditures.

Household income in the CEX is recorded as the total money earnings and selected money receipts during the 12 months prior to the interview date. Income consists of wages and salaries before any deductions for taxes, pensions, union dues, etc.; self-employment or farm net income or losses; Social Security and other private and government retirement pensions; interest, dividends, rental income, and other property income; periodic receipts from estates or trust funds; net income or loss from roomers or boarders; unemployment and workers' compensation and veterans' benefits; public assistance, supplemental security income, and food stamps including educational and job training; regular contributions for support including alimony and child support as well as any regular contributions from persons outside the household; and, other income includes money income from care of foster children, cash scholarships, fellowships, or stipends not based on working; and meals and rent as pay. Omitted from CEX income are sales of owned assets such as stocks and bonds, homes and automobiles, or other personal property.

The CEX does not specifically track income taxes, only income tax withholdings from payroll, pensions, etc. In order to estimate federal income taxes on CEX total income, we use the Internal Revenue Service's 2008 Statistics of Income for single-person filers by level of gross income.⁸ To compute State income taxes, we use the CEX ratio of state to federal taxes withheld by level of income for single persons in 2008. The BLS admits deficiencies in the CEX's ability to track information on assets and liabilities. The BLS defines the difference between total household income and total expenditures as including income taxes, net savings, and debt repayment. For example, while mortgage interest is coded as expenditure, payment of mortgage principal is a debt repayment. When total expenditures exceed income, the BLS attributes that result to persons using savings and/or debt to maintain their expenditures.⁹

CEX Expenditure Aggregation

In order to compute a variety of measures of personal consumption, all of the CEX microdata expenditures were aggregated into three categories as shown in Table 6. Most of the aggregations of expenditures are natural and expected. As mentioned earlier, some expenditures have a different purpose or intent when made in a single versus multi-person household; hence, the reader should keep in mind that most expenditures in one person households are made without contemplating sharing. For example, personal computers and software are placed as necessities not subject to sharing because the personal computer of a single person likely has an entirely different composition and content than a family computer. Today, computers, digital assistants, cell phones, etc. are more often viewed as necessities than luxuries. Transportation and shelter expenses were divided into operating or variable expenses such as fuel and utilities and ownership or fixed expenses which require periodic replacement. Transportation assets and household fixtures may have little depreciated value left in the single person's estate

Table 6 Expenditure Classifications used to Compute Personal Consumption

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Tabulated CEX Data

The detailed tabulated CEX microdata are shown in the Appendix as Table A1 (male wage earners ages 18 to 65), Table A2 (female wage earners ages 18 to 65), and Table A3 (male and female non-earners ages 60 & over). Income groupings were chosen in an attempt to maximize sample size by income level. The data in Tables A1, A2, and A3 are labeled by matching tables within the text of this paper. We present mean expenditures as defined in the text table along with the standard error of the mean and mean expenditures as a percent of income.

From the tabulated data, we see that for wage earners, labor income represents more than 90% of income. By income classification, females are older than males and have more non-labor income than males. From unprinted data, retirement payroll deductions as a percentage of labor income (wages plus farm and business income) for earners averaged 9.6% for males and 9.9% for females.

Discussion of the Measures of Single-Person Personal Consumption

Maintenance

Within the maintenance standard of wrongful death economic loss, damages are related to the decedent's earnings less his or her own necessary maintenance expenses found at an economical income level. In the forensic economic literature, the poverty level is often cited as an estimate of the income necessary for personal maintenance. In 2009, the official Census poverty level was $11,161 for single persons under age 65 and $10,289 for single persons ages 65 and older.¹⁰ The Census poverty level is based primarily on nutritionally adequate food plans designed by the Department of Agriculture and is not directed at total consumption dollars. As used in wrongful death litigation, the maintenance standard for personal consumption precludes the possibility for the decedent at the maintenance level of income to share expenses with survivors, if necessary. For example, if the maintenance level of expenditures is $19,000 and $18,000 represents total income, the decedent would not have any income available to share with survivors. Conversely, if the maintenance level of expenditures includes $9,000 of sharable transportation and housing expenses, the maintenance standard cannot isolate those potential losses to survivors.

In Table 7, personal maintenance expenses are depicted under the assumption that single-person personal maintenance expenses can be measured by the expenses of single persons at a minimal or economical income level. Maintenance expenses are assigned to the sum of personal and sharable expenditures as shown in Table 6 made by single persons with income between $15,000 and $19,999. Not considering income taxes or the possibility for shared expenses, for wage earners economic loss exists for all earnings levels over $19,603 for males and $21,867 for females. The forensic economist would need to modify maintenance expenses for income taxes, pensions, and Social Security amounts for plaintiff-specific incomes greater than $20,000.

Table 7 Personal and Shareable Expenses, 2009$

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In the case of the death of a married person, sharable expenses are not considered a part of personal consumption. The concept of personal maintenance as presented here for single persons could be relevant to wrongful death situations regarding married persons by deleting the shareable expenditure classifications. From Table 8, estimates of the personal expenses of single males and females could be used as proxies for the personal expenses for married persons. The advantage of such estimates is that the married couple's total personal expenditures do not have to be allocated to arrive at the husband's or the wife's personal, non-shareable expenses. For example, the personal consumption of food for a husband or wife is usually calculated by dividing the household food bill by two. Using the actual expenditures made by a single male or female for food eliminates the need for allocation. When eliminating shared expenses, the personal maintenance level calculated using CEX data is comparable to the Census poverty level figures.

Table 8 Personal Expenses, 2009$

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Standard of Living

Within the standard-of-living method of determining wrongful death economic loss, damages are related to the decedent's earnings less his or her own expenses associated with his or her standard of living given the decedent's income level. The standard of living personal consumption measure which is used in some jurisdictions contemplates that as income rises, necessary and customary expenses also increase. For example, as human capital increases earnings, expenses such as medical care to preserve earning capacity would likely increase and indoor professional jobs might require higher apparel expenditures than lower-paying factory, uniformed, or outdoor work. In Table 9, standard of living expenses are depicted under the assumption that single-person standard-of-living expenses can be measured by all of the personal and sharable expenses of single persons (as presented in Table 6) by income level. Utilizing the standard of living measure, economic loss does not exist for several of the lower income ranges by wage-earning status. In Table 10, the Table 6 shareable expenses are eliminated from the personal consumption standard-of-living estimates in order to account for the decedent's ability to provide shareable expenses to his or her survivors. Under this definition of personal consumption, economic loss (earnings × (1 – the consumption %)) exists across all income levels. In both approaches, the differences between male/female and earner/non-earner standard of living expenses are significant.

Table 9 Personal and Shareable Expenses, Percentage of Total Income

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Table 10 Personal Expenses, Percentage of Total Income

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Support to Survivors

Instead of focusing on computing a personal consumption deduction from earnings, we can reverse the procedure to compute the percentage of decedent's earnings subject to the survivor's or estate's contingent losses. Within the support to survivor's method of determining wrongful death economic loss, damages are related to the decedent's earnings multiplied by the percent of decedent's income that would be used to support others. In Table 11, two measures of support to survivors are presented. The first measure presents the decedent's Table 6 definition of support to others as a percentage of income. The second measure adds the decedent's sharable expenses as defined in Table 6. Economic loss in both estimates is measured as earnings multiplied by the support percentage. In contrast to the pure maintenance and standard-of-living calculations, economic loss exists to the survivors at all levels of decedent's earnings. These measures of economic loss do not require anything to be said about the decedent's income tax situation. It is remarkable that the decedent's support to others is essentially a flat percentage of income across income ranges. Non-earners provide more of their income for the direct support of others than do wage-earners.

Table 11 Support to Others and Support to Others plus Shareable Expenses, Percentage of Total Income

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Estate Accumulations and Support to Survivors

Within the estate accumulations and support to survivor's methods of determining wrongful death economic loss, damages are related to the decedent's earnings multiplied by the percentage of the decedent's income that would be used to support others or provide accumulations to the decedent's estate. The data in Table 11 of this paper do not contemplate the survivors or estate's access to savings or other accumulation. In Table 12, estimated net estate accumulations are defined as income less total CEX expenditures (income taxes are also separated) as a percentage of income. The loss to the estate could be calculated as Table 12 estimates multiplied by earnings.

Table 12 Net Estate Accumulations, Percentage of Total Income

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An interesting result from Tables 11 and 12 is that only the estate suffers when the decedent's borrowing causes expenditures to exceed income. Traditional personal consumption methods can penalize the survivors of the debt incurring decedent without realizing the survivors would most likely not be responsible for their decedent's debts.

In Table 13, the decedent's shareable expenses and support to others are added to positive values of annual net estimate accumulations to provide an alternative measure of potential support to survivors during the expected joint lifetime of the decedent and survivors. Adding positive values of annual estate accumulation assumes that the survivors are not concerned with any negative estate value of the decedent. Economic loss in both estimates is measured as earnings multiplied by the total benefit percentage.

Table 13 Shareable Expenses and Support to Survivors and Positive Net Estate Accumulations, Percentage of Total Income

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Conclusion

After examining the competing perspectives regarding single person consumption, this paper makes an effort to improve the quantification of economic losses in cases involving the wrongful death of single persons. I show a new disaggregation of the CEX microdata source which is then used to calculate various economic loss measures warranted by legal jurisdiction and economic thought. Traditional personal consumption methodology computes economic losses as the decedent's earnings multiplied by one minus a personal consumption rate. This paper adds a new method of computing economic losses as the decedent's earnings multiplied by the percent of survivors' or estate's benefit from those earnings. Significant differences result between the methods and in the personal consumption amounts between males and females and wage-earners and non-wage earners of retirement age. It was also discovered that some single-person maintenance consumption results may be applicable to married persons.