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- Much of the US has been under a heat wave, with temperatures expected to continue rising.
- A 2014 economic study indicates that hot days can have a surprisingly big negative impact on economic activity.
- As climate change leads to more frequent heat waves, that economic impact could add up in the future.
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From the Great Plains to the Eastern Seaboard, a heat wave has been rolling over much of the US, with temperatures set to eclipse 100 degrees Fahrenheit on the East Coast and 110 degrees in the Midwest over the weekend.
It turns out that heat waves can have a direct impact on how much workers produce and earn on a particular day. In fact, according to recent research, a hot day can decrease productivity by as much as 24%.
In a 2014 paper, the economists Tatyana Deryugina of the University of Illinois and Solomon Hsiang of the University of California at Berkeley found that days with higher temperatures had a surprisingly large negative economic impact.
“As we have more frequent hot days, we expect economic productivity to decline,” Hsiang told NPR’s “Marketplace” in a recent interview. “This will probably be quite subtle, because one day is a little bit hotter, you’re a little bit less productive, but those days will add up.”
The research approach
In their paper, Deryugina and Hsiang combined county-level temperature data from the National Oceanic and Atmospheric Administration and income data from the Bureau of Economic Analysis between 1969 and 2011 to see how hot days affected economic productivity.
Using a model that could account for differences between counties and larger national long-term economic trends, they found that warm and hot days had lower economic productivity than cooler days. Their main result was that per capita income in US counties tended to increase with temperature until hitting about 59 F, and then dropped as temperatures got hotter.
For example, they found that a day with an average temperature of about 84 F would cause annual income in a county to be 0.065% lower than if that day were 59 F instead. While that’s a small drop in total annual income, they noted that this translated into the 84-degree day being about 24% less productive than an average day.
The main findings
The hottest days, with temperatures above 86 F, caused annual income in a county to be 0.076% lower than a 59-degree day. That would translate into the hottest days being about 28% less productive than an average day.
In dollar terms, they reported that “altering a day’s temperature from 15°C (59°F) to 29°C (84.2°F) reduces annual county income per capita by $16.71 on average.” That is, in the average US county, economic activity per person on a hot 84-degree day would be about $17 lower than on a cooler 59-degree day. Adjusting by county populations, they found that warm days cost the average American about $4.80.
While that drop in income is fairly small on an individual basis, hot temperatures across much of the US can add up and have a bigger impact on overall national economic activity. As a back-of-the-envelope estimate, a heat wave affecting a third of the country, or 100 million Americans, would have an economic cost of about half a billion dollars, based on the $4.80-a-person estimate above.
Mapping the larger trends
Deryugina and Hsiang found that the bulk of the economic damage from hot days came from the agricultural sector. This is not overly surprising, since heat and droughts can have pretty clear direct impacts on crop yields.
They did find, however, that nonfarm productivity also tended to decline at higher temperatures, most likely from workers in temperature-sensitive occupations working outdoors or in buildings exposed to outdoor temperatures needing to take more breaks or work more slowly.
Increased temperatures can have other effects on worker productivity. “People make mathematical errors when temperatures rise, so if you’re doing something that’s a very technical job, you may have errors creep in,” Hsiang told “Marketplace.”
The researchers noted that as climate change leads to higher average temperatures and more hot days, this economic impact could increase in the future. Using their model for how hotter days affect productivity, they found that under a “business as usual” climate-change projection, the higher number of hotter days could cause economic growth to decline by 0.12 percentage points a year. They also pointed out that this would be from hotter days alone and not other possible effects of climate change like increased flooding or natural disasters.