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At Work in a Warming World

At Work in a Warming World

Consider the most dangerous threats posed by global warming. Maybe your thoughts turn to supercharged hurricanes or to floods submerging cities. Or perhaps to droughts and desertification.

Yet severe heat is more deadly than hurricanes, tornadoes and floods combined, according to the National Weather Service. Williams economists Gregory Casey and Matthew Gibson have joined forces to study this critical hazard—specifically, the impacts of severe heat on outdoor laborers. In a paper co-authored with Stephie Fried, a research adviser in the Economic Research Department of the Federal Reserve Bank of San Francisco, they posit that economists have underestimated the impact of reduced labor productivity because of extreme heat. Their research received the Institute of Labor Economics’ “Innovative Research in the Economics of Climate Change” prize last year.

In 2023, the hottest year since global records began, extreme heat killed at least 2,300 people in the U.S., more than triple the annual average, according to an Associated Press analysis of federal data. Researchers say this number is likely undercounted, with medical staff often failing to include heat as a cause of death.

According to the National Integrated Heat Health Information System, brutal heat does not treat people equally. Alongside the elderly, sick and individuals without housing, workers laboring in the open air are most vulnerable to extreme temperatures. A March 2024 Guardian article states that construction workers in places like Arizona—where it is increasingly common for the mercury to hover around 110 degrees Fahrenheit in the summer and for metal equipment to become too hot to touch—are exposed to the risk of heat stress, a potentially fatal scenario in which the body can no longer regulate its internal temperature.

Data provided by the U.S. Bureau of Economic Analysis show that in the U.S., outdoor industries such as construction, agriculture and mining account for around 7 percent of the gross domestic product. Additional days of brutal heat will reduce operational hours in those industries, forcing work crews to adjust and limit their schedules. And it’s already happening: Several years ago, relentlessly high temperatures in Phoenix forced some construction workers to work at night, according to reports from National Public Radio and The New York Times. This summer, the Biden administration is widely expected to propose a rule forcing employers to limit workers’ exposure to extreme heat.

“Construction is hard work,” Casey says. “And as the climate changes and the world gets warmer, there are going to be more and more days when it won’t be safe to work for the whole day.”

In their paper, which is forthcoming in the European Economic Review, Casey, Gibson and Fried break down economic activity by industry. They calculate how heat stress might affect labor productivity sector by sector. Then they deploy a weather prediction model to forecast the number of future days with extreme heat. This model, which assumes no reduction in carbon emissions, predicts that, on average, the annual number of days above 91 degrees for U.S. outdoor workers will increase from near zero to almost seven between 2020 and 2100.

Casey and Gibson’s research, funded by a grant from the Washington Center for Equitable Growth, uncovers what, exactly, a hotter world might mean for these industries and the wider economy. “There is a literature in climate economics that thinks about capital destruction, chiefly, natural disasters,” Gibson says. “We heat up the oceans, we get more intense hurricanes, and more homes are destroyed. But in our work, we ask: What if climate change makes it harder to make new buildings too?”

Traditional models for predicting how global warming will impact the economy are not broken down by industry. This means that economists often miss the fact that “a change in the climate does not have an equal impact on the different components of the economy,” Casey says.

Extreme heat reduces productivity in some sectors but not in others. In the service industry, for example, workers are generally cooled by air conditioning. The traditional economic model, the team realized, was incorrectly calibrated. Asks Gibson: “What are the consequences of adding one more degree of realism?”

The team’s calculations show that severe heat will cause a drop-off in productivity which, they find, triggers serious problems down the line. If labor productivity drops in the construction sector, there is a corresponding long-term decline in the cumulative value of assets such as new buildings, investments that pay off over many years. Economists call investments like buildings “capital stock,” and they are an important part of a strong economy. By 2200, the paper shows, extreme heat will reduce U.S. capital stock by 5.4 percent.

“If construction productivity goes down, that means that there are fewer buildings being built,” Casey says. “But that doesn’t just hurt the economy today. Because if I were able to build the buildings today, they would generate a lot of economic benefits far in the future. So the consequences of extreme heat today are going to continue to affect the economy many, many years in the future.”

At Williams, Gibson teaches courses on the economics of climate change and pollution, while Casey’s teaching focuses on economic growth and macroeconomics. During a leave over the 2024-25 academic year, both will join the federal government, using their insights to help shape policy. Casey will join the White House Council of Economic Advisers, focusing on climate and environmental policy, while Gibson will take a position as a senior adviser to the Office of Information and Regulatory Affairs, working on benefit-cost analyses of regulations.

Their findings come with some caveats, they say. Casey, Gibson and Fried assume no success in reducing emissions. Plus, a hotter world means warmer winters, and climate change could increase labor productivity in places where it is sometimes too cold to work, potentially offsetting productivity losses from extreme heat.

Nevertheless, Casey and Gibson see the paper as the beginning of an important conversation about how the future economy will be shaped by rising temperatures. “The point of the paper is not to say we’ve nailed the number,” Gibson says. “You could interpret the paper as a first step and as an exhortation to other researchers to pay attention to how the capital stock will respond to a changing climate.”

Tomas Weber is a London-based writer whose work has been published in The Economist’s “1843 magazine,” WIRED, Smithsonian Magazine, The Guardian, Artforum, ArtReview and Frieze. He is a frequent contributor to Williams Magazine and Williams Today.