Abstract

ABSTRACTChanges in labour productivity feed through directly to national income. An external shock, like climate change, which may substantially reduce the productivity of workers is therefore a macroeconomic concern. The biophysical impact of higher temperatures on human performance is well documented. Less well understood are the wider effects of higher temperatures on the aggregate productivity of modern, diversified economies, where economic output is produced in contexts ranging from outdoor agriculture to work in air-conditioned buildings. Working conditions are at least to some extent the result of societal choices, which means that the labour productivity effects of heat can be alleviated through careful adaptation. A range of technical, regulatory/infrastructural and behavioural options are available to individuals, businesses and governments. The importance of local contexts prevents a general ranking of the available measures, but many appear cost-effective. Promising options include the optimization of working hours and passive cooling mechanisms. Climate-smart urban planning and adjustments to building design are most suitable to respond to high base temperature, while air conditioning can respond flexibly to short temperature peaks if there is sufficient cheap, reliable and clean electricity.Key policy insightsThe effect of heat stress on labour productivity is a key economic impact of climate change, which could affect national output and workers’ income.Effective adaptation options exist, such as shifting working hours and cool roofs, but they require policy intervention and forward planning.Strategic interventions, such as climate-smart municipal design, are as important as reactive or project-level adaptations.Adaptation solutions to heat stress are highly context specific and need to be assessed accordingly. For example, shifting working hours could be an effective way of reducing the effect of peak temperatures, but only if there is sufficient flexibility in working patterns.

Highlights

  • Labour productivity is an important driver of economic success

  • Hotter-than-average years lead to lower output in hot countries, but lead to higher output in colder countries – the relationship is around 3% or 4% change in labour productivity per °C variation

  • The pursuit of labour productivity is, central to development policy. Any external shock, such as climate change, which negatively affects the productivity of workers, is a potential concern

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Summary

Introduction

Labour productivity is an important driver of economic success. Economists devote a great deal of attention to understanding, measuring and enhancing productivity (see e.g. Bosworth & Collins, 2008; Jorgenson, Ho, & Stiroh, 2008; Van Ark, O’Mahoney, & Timmer, 2008). The potential impact of climate change on labour productivity is an important economic concern. Any changes in labour productivity will have a direct effect on national output and individual incomes. There is growing evidence that the labour productivity effects of climate change could be substantial. Rising temperatures may increase labour productivity in regions with low baseline temperatures (Hallegatte et al, 2016; Heal & Park, 2016), but in most countries – especially lower income countries – and at the global scale the effect is likely to be negative The aggregate national-level effect of heat on economic output is on a par with other health-related impediments to labour productivity (Evans-Lacko & Knapp, 2016; Goetzel et al, 2004; Vivid Economics, 2017).. According to the IPCC fifth assessment report global mean temperatures by 2100 are likely to be at least 1.5°C higher than during 1850–1900 and under some scenarios more than 5°C higher (IPCC, 2014), with varying increases for individual regions and a higher incidence of temperature spikes in most places

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