Feeling the heat? So is our economy!

Labourer taking an afternoon nap
(c) Sheriar_Irani

Tarek Cheaib, former student on the Grantham Institute and Imperial College Business School MSc in Climate Change, Management and Finance, considers the impact of heatwaves on the workplace, and why they will have a big impact on the global economy. 

It’s easy to see the economic impact of extreme weather events or natural disasters like wildfires or floods. In 2012, for example, Hurricane Sandy forced the closure of the New York Stock Exchange for two consecutive days. The impact of heatwaves, however, is less well-documented – despite the fact that excessive workplace heat is a serious occupational health and productivity concern.

Temperature discomfort and the subsequent inability to focus are common workplace complaints. In  2009, the first report to discuss, and attempt to quantify, the direct impact of climate change and increasing temperatures on labour productivity was published. It estimated that if the average global temperature were to increase by 6˚C, the absolute loss in labour productivity due to heat could reach up to 27%, equal to 23% of global gross domestic product (GDP) by 2100.

How long have we known about this?

Have you ever wondered why the Spanish take afternoon siestas or why most Greeks and Italians close their shops for a couple of hours during lunchtime? When people carry out physical work, heat is produced internally and needs to be transferred externally to make sure that our body temperature remains constant. As the body works harder to maintain its temperature within acceptable norms, mental ability, work capacity and labour productivity diminish. It comes as no surprise then that, since the sixth century, people from hot climates have planned their working schedule to avoid the scorching midday heat. People are better off taking a nap and working the hours later in the evening, than forcing themselves to work in energetically draining conditions.

What jobs are at risk?

Various studies have shown that labour productivity decreases by 2% for every degree (°C) above a given ‘normal’ room temperature. In India for example, the productivity of a call centre worker decreases by 1.8 % per °C above room temperature (taken to be 21°C in this particular study). Similarly, in the United States, automobile manufacturing decreases by 8% during weeks when six or more days have temperatures above 32°C.

Needless to say, the harsher environment that follows climate change will make working outdoors even more difficult. In the US alone, half of all jobs that sustain its economy require some type of outdoor work. These range from intrinsically outdoor industries, such as agriculture, construction and fishing, to leisure, hospitality and transportation, where workers spend significant time outdoors.

What does this mean for developing countries?

Although scientists measure increases in the average global temperature, some parts of the world will see much more pronounced warming, and a corresponding drop in productivity. For example, assuming a 3.4 °C global average temperature increase, Central Latin America will incur a projected 26.9% loss in work productivity, whereas Western Europe will only see a projected 0.1% loss.

Graph showing work capacity loss (% of daylight hours) in 2030 and 2050 based on regional climate change, populations and estimated workforce distributions. 
Figure 1. Work capacity loss (% of daylight hours) in 2030 and 2050 based on regional climate change, populations and estimated workforce distributions.

Furthermore, the world’s warmest regions with pre-existing temperature extremes are, on average, the world’s poorest (Figure 2). The livelihoods of people living here depend on jobs that expose them to greater heat stresses, such as work in agriculture and manufacturing, and pay lower wages. As a result, many of these households cannot afford adequate health care or equipment, like fans or air-conditioning units, to help them deal with environmental stresses. Furthermore, emerging economies have fewer climate-controlled workspaces, and higher levels of subsistence farming – which is, in itself, vulnerable to temperature change. Increased temperatures, and the corresponding drop in productivity, will have a big impact on efforts to reduce poverty and boost economic growth.

World map showing average mean temperatures (°C) during afternoons of hottest months at each location in the world (RCP 8.5)
Figure 2. Average mean temperatures (°C) during afternoons of hottest months at each location in the world (RCP 8.5)

What does this mean for rich countries?

This is not only a problem for people living in hot countries – it matters to Europe too. Given the international nature of supply chains in manufacturing, agriculture and food production, and increasing trade dependencies of global economies, a decrease in global labour productivity will also be felt by economies that don’t suffer the direct impacts of heat stress.

Ultimately, rising temperatures resulting from climate change could have a significant impact on global economic growth. It is no longer a question of “why” we need to stop this, but “how” we are going to do so.

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