Warmer temperatures are associated with significant drops in worker productivity, with a more than 2% drop in annualized output for each 1 degree Celsius increase in temperature, according to a new paper using data from manufacturers in India.
The findings, forthcoming in the Journal of Political Economy, have serious implications for developing and manufacturing-oriented economies like India, which in recent years has suffered from deadly heat waves that scientists say were exacerbated by climate change.
“Reduced labor productivity due to heat is a big deal, perhaps more so than we previously thought,” said co-author Anant Sudarshan, an energy and environmental economist at the University of Chicago, in an interview.
Using data from cloth weaving, garment sewing and steel manufacturers in India, Sudarshan and his co-authors found that worker output significantly decreases during individual days that are hotter than average, as well as during weeks with an abnormally high number of hot days. Workers were also more likely to miss work during hotter-than-average periods.
Absenteeism was lower in factories with air conditioning than in those without it, but climate control did not altogether eliminate the rise in worker absences during hot spells. This suggests that even widespread installation of air conditioning would not completely eliminate the effects of higher temperatures on productivity.
Of course, an abnormally warm day in 2021 may be a typical day in a decade or two. India's average temperature is expected to rise by almost 4.4 degrees Celsius by 2100 if steps are not taken to reduce emissions, according to the Indian government’s Ministry of Earth Sciences.
“The effects we find are not small and will get worse if the number of hot days in a year starts increasing in the future,” said Sudarshan.
Sudarshan wrote the paper alongside Easwaran Somanathan of the Indian Statistical Institute in Delhi, Rohini Somanathan of the Delhi School of Economics and Meenu Tewari of the University of North Carolina at Chapel Hill.
In addition to examining worker and firm-level productivity, the researchers also used national-level data on India’s broader factory sector from 1998 to 2012. They found that overall plant output was lower in warmer years, and annual output can be expected to fall by 2.1% if each day in a given year were to warm by 1 degree Celsius.
Sudarshan said the effects of rising temperatures on factory output can be reduced by investments in air-conditioning, cooler clothing and even more experimental technology such as a wearable cooling patch developed by engineers at the University of California, San Diego.
Governments in countries like India should also consider taking climate factors into account when designating special industrial zones or introducing other policies to encourage labor-intensive manufacturing, the economist said.
In comparison to a country with a cooler climate, firms in warmer countries like India have to spend more money on cooling to reach the same level of productivity, according to Sudarshan. He described this drain on resources as a “heat tax.”
“Countries who have high temperatures or will see significant warming due to climate change have less productive labor, all else held equal,” said Sudarshan.“Making labor equally productive would then require climate control and spending on electricity, just to get on an even footing.”
A growing body of research has shown links between temperature changes and economic production. Looking at this research in general, Sudarshan has seen that, "The effects of warming are good for very cold countries and turn extremely negative for warm countries.” However, the specific sectoral mechanisms through which temperature changes influence economic production were less clear.
“We know that crops do worse in the heat, but even countries without a lot of agriculture seem to respond negatively to heat,” said Sudarshan. “Our paper tries to provide another explanation why this might be.”
Sudarshan, who has a Ph.D. in management science and engineering from Stanford University, said he came up with the idea for the paper while trying to write another paper in Delhi during a hot summer when his air conditioner stopped working.
“Naturally I could get nothing done, and that seeded the idea for this paper,” he said.
Sudarshan said he is currently working on projects around studying and reducing air pollution in developing countries, as well as irrigation and electricity issues involving poor farmers.
The paper, titled The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing,” is forthcoming in the Journal of Political Economy. The authors are Easwaran Somanathan of the Indian Statistical Institute in Delhi, Rohini Somanathan of the Delhi School of Economics, Anant Sudarshan of the University of Chicago and Meenu Tewari of the University of North Carolina at Chapel Hill.