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You Might Earn $20 Less Per Day Because of Climate Change

Worker productivity declines as temperatures rise, meaning US economic growth could slow, costing billions — or even trillions — of dollars.
Image via AP/Chris Carlson

By now you're probably familiar with the litany of potential impacts from climate change: submerged coastal infrastructure, more frequent, extreme weather events, and even more violence. And now, to the long list of climate woes, you can add one more: You'll likely make less money.

That's the chief finding of a new study from the National Bureau of Economic Research (NBER), which shows the productivity of American counties declines by nearly one percent for every degree Fahrenheit by which temperatures exceed 59 degrees.


"In the past, we thought that wealthy countries were not really affected by changes in their local environment — that if we have a lot of money, we can, for example, build a lot of air conditioners," co-author Solomon Hsiang of the University of California, Berkeley, told VICE News. "That's probably true to some extent, but we're not completely insulated. When the environment changes, we still see it in the United States."

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Hsiang and University of Illinois finance professor Tatyana Deryugina compared 40 years of meteorological and economic data at the county level. They found that between 54 and 59 degrees was the optimal temperature range for economic performance, and that warm days — 75.2 to 80.6 degrees — reduced counties' per capita income by nearly $15, primarily by sapping the productivity of workers and crops.

Those temperatures represent daily averages, meaning that during a 59-degree day, temperatures could reach, say, 70 degrees in the afternoon, while falling into the 40s at night.

Hot days — ones over 86 degrees — reduced per capita income by more than $20.

Those findings are consistent with the ample scientific literature on the effects of heat on productivity. In one seminal 1946 paper, for instance, researchers found that British telegraph operators were substantially worse at decoding Morse messages under hot and humid conditions.


To understand why that might the case, said Hsiang, imagine putting on an ultra-thick sweater over whatever other clothes you're currently wearing. "It wouldn't be so bad for a little while," he said. "But gradually your core temperature would start to get warmer and eventually that would affect everything in your body, as well as the way you do your job."

'It's not economic collapse; but it's not a little thing either.'

Some scientists have dismissed the impact of climate change on labor productivity, saying it's primarily a concern of the developing world. In 1992, the economist Thomas Schelling speculated that in the United States, Japan, and Western Europe, the impacts of climate change "will be negligible and unlikely to be noticed."

But this new study calls that conclusion into question. If countries stick to their current business as usual trajectory of greenhouse gas emissions and temperature increase, Hsiang and Deryugina found, annual growth in the United States could decline by up to 0.16 percentage points.

That may not sound like a lot, but compounded over a century, it could add up to billions or even trillions of dollars.

"It's not economic collapse; but it's not a little thing either," Hsiang told VICE News. "If you change the growth rate just a bit, and you wait a while, you could have a very different world."

That comes as no surprise to Kate Gordon, director of the Risky Business initiative, an effort, co-chaired by Michael Bloomberg, Tom Steyer, and Henry Paulson, to quantify the economic impacts of global warming.


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"Declines in labor productivity don't immediately come to mind when you think about the costs of climate change," Gordon told VICE News. "But they're going to be one of the most significant economic impacts over the course of this century, in warmer states in particular."

A report released earlier this year by Risky Business found that a litany of climate-related effects, including hot temperatures, are likely to cost the country anywhere from 0.7 percent to 2.4 percent of GDP by century's end. According to that assessment, increased storm intensity and frequency, combined with sea-level rise, could someday damage the nation's economy to the tune of $89 billion annually.

But while coastal inundation is perhaps the most visually striking manifestation of climate change, the NBER temperature study proves that subtle changes can be just as significant. "Extremes are easy to observe: We all think that hurricanes are really important because they're hard to miss," Hsiang said. "But you can also have death by a thousand cuts."

Fortunately for all those who value a stable climate, the world may yet have a chance to stave off the economically devastating business as usual scenario. Earlier this fall, the United States and China — the world's two largest greenhouse gas emitters — negotiated a deal to cut carbon pollution. This past weekend, nearly 200 countries signed the Lima Accord, the framework for an international climate agreement, which world leaders have pledged to approve in Paris next year.


According to one recent projection, the planet is now heading to three degrees Celsius of warming — still enough to inflict dramatic changes to Earth's climate but less than previous assessments have forecast.

That progress, says Gordon, has been spurred along by an improved understanding of global warming's costs, labor productivity among them.

"Taking a risk-based approach is nonpartisan and familiar to any business making a long-term investment," she told VICE News. "Using the language of risk to talk about climate change is seeping into the global conversation."

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Follow Ben Goldfarb on Twitter: @ben_a_goldfarb