Outstanding Issues in the Valuation of Household Services

By Therese Brown and Christopher Bruce

This article was originally published in the spring 1998 issue of the Expert Witness.

In this, the final in a series of articles on the estimation of the loss of household services we discuss a number of issues which have received relatively little attention from the courts. These include:

  • the estimation of loss when the plaintiff can complete all necessary household chores, but these tasks take longer to complete than before the accident;
  • determining the age at which the loss of household services should be presumed to end; and
  • the effect of retirement on the number of hours of household services.

The Efficiency Issue

A common problem is that the injured plaintiff is sometimes still able to complete all the household chores that he or she performed prior to injury, but these tasks now take longer to complete. For instance, a female plaintiff may be able to continue with meal preparation and washing up, but whereas she had previously required 10 hours a week for this task, she finds that it now takes her approximately 15 hours a week.

One approach would be to argue that, as the plaintiff is able to “produce” the same number of household services as before her injury, she has lost nothing. However, this ignores the fact that she has lost the use of five hours per week in some other activity. Those hours may have come, for example, from hours worked or from leisure time. If it is the former, her damages could be valued using her wage rate. More commonly, however, it is leisure time that suffers, and only very rough estimates of the value of this use of time are available

A third approach, which we prefer, proceeds in two steps. First, we determine how many hours of household chores would remain to be completed if the plaintiff was to work the same number of hours in the home as she would have before the accident. Second, the cost of hiring replacement workers to perform those “missing” hours is calculated.

In the example cited above, assume that the plaintiff was to perform 10 hours of meal preparation after the accident. As she is working at only 10/15ths the speed that she had been working before the accident, she will complete in those hours, 10/15ths as much as she would have prior to the accident. That is, she will complete as many chores as she would have previously in 6.67 hours. This implies that 3.33 hours worth of chores remain to be done. It is the cost of hiring a housekeeper for this number of hours that we suggest should be used to represent the plaintiff’s loss.

At What Age Does the Loss End?

Two alternative approaches have been suggested to determine the age at which individuals would normally cease to engage in household production. The first such approach simply assumes that individuals cease to provide household services after their retirement ages. This approach is generally unsatisfactory, however, as the evidence suggests that the vast majority of seniors, some of whom may exhibit mild to moderate disability, do not require assistance with activities such as shopping or housework, the instrumental activities of daily living. Eric Moore et al, in their publication Growing Old in Canada, point to Statistics Canada data which indicates that 90.4% of men and 84.5% of women from 65 to 74 years old are in this category. Neena Chappell, in her book Social Support and Aging, argues that, while the existence of chronic health conditions is not uncommon in seniors, such conditions often do not lead to functional disability or limitations in activity.

A second commonly used approach is to continue the loss of household services only to age 80. There is considerable evidence to support this type of approach. Reference to statistical information about the living arrangements of today’s seniors, as well as their participation in household activities, makes it apparent that increasing numbers of seniors live independently to this age, requiring little or no assistance.

Herbert C. Northcott, in Aging in Alberta, makes evident the growing trend for seniors to remain in private households. While 13.4% of seniors in 1976 were institutionalised, this proportion dropped to 9.0% in 1991. Possible reasons for this decline include the increasing ability and desire of seniors to continue to live independently, as well as the shortage of institutional beds. At any rate, there is reason to suggest that the trend toward decreasing institutionalisation will continue.

Many seniors living at home do not require help with household work. The Statistics Canada publication A Portrait of Seniors in Canada makes this apparent. Of those 65 and older living at home in 1991, only 36% required assistance with housework. Fewer still required assistance with grocery shopping and yard work (31.5% and 30.0% respectively). Only 26% of this group required help with meal preparation. By far the greatest proportion of this assistance (68%) came from the individual’s spouse.

Much of the research would indicate, therefore, that not only are most seniors remaining in their own homes, but also most of them are managing to do so with little or no assistance. For this reason, it would seem prudent to recognise the extent to which most seniors are able to continue with productive contributions in the area of household services.

After age 75, however, an increasing number seniors suffer from chronic health conditions which limit their activity. An example of such an indicator is reported in the Statistics Canada Publication A Portrait of Seniors in Canada. While only 36% of 65 to 74 year-old non-institutionalised seniors reported activity restricting health problems, 46% of their counterparts aged 75 and older reported such restrictions. In addition the rate of institutionalisation does increase with advancing age. Herbert Northcott reports that in 1991, in Alberta, the rate of institutionalisation was only 2.8% for those aged 65 to but rose to 18.3% for those 75 years of age or older.

For these reasons, our approach is to seek a middle ground. It would appear that to assume that household productivity or participation in household services will decline significantly at 65 or 70 years of age would be to discount the contribution that many seniors are willing and able to make long past that arbitrarily assumed time. On the other hand, to continue the loss of household services to life expectancy would ignore the evidence that seniors in later years do increasingly face the risk of institutionalisation and activity-limiting disability. We find the statistical evidence supports the continuation of the loss of household services until approximately age 80.

Does a Change Occur in Household Services Contribution at Retirement?

Intuition suggests that the number of hours devoted to household work will decrease at retirement. This, however, is not what the statistics suggest. In fact, the contribution to household activities tends to increase significantly at retirement. An excellent source of information concerning the number of hours thus contributed is available from the Statistics Canada publication, As Time Goes By‚ĶTime Use of Canadians. For example, a married, retired male’s contribution at age 65 (3.1 hours per day) is almost double that of the married, full-time employed male’s contribution at age 45 to 64 years of age (1.7 hours per day). These available statistics can be readily used to forecast the future household contributions of the plaintiff at retirement. Our approach is to consider the number of hours that the plaintiff contributed prior to the accident and then increase them by the same percentage that the average individual’s contribution would increase, as indicated by this resource.

There may be concern expressed about this type of approach, for the reason previously mentioned, that an increase in household services at retirement may not be intuitively obvious. In our view, the approach we take – to adjust the individual’s contribution to reflect what actually occurs with individuals of the plaintiff’s ilk – is the only responsible approach to take in the interests of accuracy.

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From 1996 through February 1998, Therese Brown was a consultant at Economica.

Christopher Bruce is the President of Economica and a Professor of Economics at the University of Calgary. He is also the author of Assessment of Personal Injury Damages (Butterworths, 2004).