Hot Days & Melting Profits: The Economic Impacts of Extreme Temperatures
Last summer, this particular article caught my attention. Describing the explosion of new construction between San Antonio and Austin, Texas, the article quotes a local foreman who has watched team members slur their words, stumble, and black out from the heat. To manage extreme temperatures at the worksite, he mandates rest breaks under shade when they first turn pale or start slurring words, regardless of break schedule.
While allowing workers a cool-down break when they experience cognitive changes is certainly a good practice, the article’s seemingly casual reference to these symptoms, especially slurring words, caught me by surprise. Along with blacking out, all are classical symptoms of heat stroke and an indicator that a potentially fatal medical emergency may be imminent. Such situations are ideally treated with intensive efforts to force rapid cooling that go well beyond a simple break in the shade. But for construction teams on hot job sites like the one interviewed in the article, symptoms of imminent heat stroke appear more likely to be treated as just another summer work hazard, and almost certainly one with risks that are highly underestimated.
Physiology of Outdoor Work
Human heat production is commonly measured in watts. A watt is a unit of power, and power measures the rate at which energy is used. Most of us aren’t familiar with watts but have some understanding of calories from food we eat. Watts and the more intuitive “calories per hour” measure the same thing (power), just on a different scale, in the same way that miles per hour and kilometers per hour both measure speed. Let’s say I go on a run. At a moderate pace, I might burn an average of 600 calories per hour and travel three miles; I could also describe this run as requiring an average of about 700 watts of effort for 4.8 kilometers.
Watts are commonly used to measure heat transfer, making them a useful unit in thermal physiology because most of the energy humans expend is released as waste heat (up to 80%). Surprising little of our energy expenditure (only about ~20%) actually goes into performing useful work like movement.
Occupational work has typical heat production values between 250-450 watts. On average, the greatest energy expenditure is required for agricultural work (~418 watts on average) followed by construction (~341 watts) and manufacturing (~265 watts), although these average values vary significantly depending on the actual work task being performed. For reference, human resting metabolism generates around 100 watts.[1] The most intense sustained efforts by world-class elite athletes top out around 1,300 watts – or 1,100 calories per hour. [2]
In a study of 325 occupational tasks, “work with axe” was listed as the task with the highest energy expenditure, therefore generating the most metabolic heat (and carrying implications for wildland firefighters). Jobs such as shoveling and warehouse activities require moderate to high energy expenditures (no surprise there). Postal delivery work sticks out for its (perhaps surprisingly) high required energy expense, a factor in postal worker heat stroke deaths which have occurred nearly annually in recent years.
Worker Responses to Extreme Heat
The amount of heat produced by a working human is highly dependent on work intensity, so it is natural for workers in hot conditions to slow down, take extra breaks, or reduce working effort to avoid overheating. Such behavioral modification serves to protect us from heat stroke but can be suppressed by highly motivated individuals, such as workers paid by output quantity when there is a monetary incentive to maintain a rapid working pace. Even law enforcement officials slow down during extreme heat, with the frequency of police stops decreasing on very hot days.
Additionally, extreme heat affects worker productivity by reducing the physical capacity for work and decreasing motor-cognitive performance. Simply put, no one can work their hardest in the heat (or can only do so for much shorter periods). Multiple days working in hot conditions compounds heat-imposed challenges. One study continuously monitored electrical utility workers over two hot days. Despite taking longer rest breaks on the second day, worker core temperatures and dehydration levels were higher compared to the first hot day.
Other studies have quantified workplace time lost due to hot weather. For example, vineyard workers take significantly longer “irregular breaks” in hot conditions, resulting in an additional 5% of each work shift lost during the hottest summer days. The time spent on irregular breaks increased nearly 1% for each 1.8oF (1oC) rise in temperature. One Australian study, considering the (at the time) exceptional heat of summer 2013/2014, calculated heat-driven lost earnings of $655 per person (over $900 in today’s dollars) due to absenteeism and reduced work performance.
Temperatures don’t need to be excessively hot to affect worker productivity. Manual labor productivity starts to decline at temperatures above 68oF, and performance declines faster as temperatures rise higher. A study of construction work found the “ideal temperature” for peak labor performance is about 77oF, while the ideal temperature for endurance athletes is around 50oF.
Although these temperature thresholds appear low- no one would argue 68oF is excessively hot- it is because metabolic heat generated by work forces the body to expend at least some effort into cooling down, even at relatively low temperatures. The effort put into cooling could otherwise be spent on the task at hand. Especially for construction and similar outdoor work, productivity losses are most pronounced when temperatures exceed 95oF or when wet bulb globe temperature exceeds about 82oF.
Lost productivity isn’t only caused by longer breaks during hot conditions. The rate of workplace accidents goes up significantly in extreme heat. A study looking at the relationship between heatwaves and worker’s compensation claims found claims increased 45% during moderate-to-severe heatwaves in Brisbane, an Australian city with a climate similar to Tampa. Cities in more temperate climates had smaller, but still substantial, increases of around 25%. Similar studies find for each 1.8oF (1.0oC) increase in temperature, the odds of workplace injury increase up to 1%, with younger workers and workers engaged in heavy physical work at greatest risk of injury.
Extreme Temperature Economics
It is easily assumed economies of wealthy, developed countries like the U.S. are not affected by excessive heat. Yale economist William Nordhaus, in his prize lecture after winning the Nobel for research estimating the economic impacts of climate change, noted that highly managed economic sectors can adapt to rising temperatures at little cost. Many Americans work indoors in such “managed sectors” and are seemingly little affected by weather, heatwaves, or climate generally.
However, evidence is clear that temperature still matters for economic performance, even within the U.S. In the report “Does the Environment Still Matter? Daily Temperature and Income in the United States”, the National Bureau of Economic Research (NBER) identified that extreme heat significantly reduces economic output and daily personal income. This finding doesn’t contradict the Nobel-winning work by Dr. Nordhaus, who himself notes that highly managed economic sectors are the exception, not the norm- most economic sectors we rely on for modern life, even in the U.S., are unmanaged or unmanageable.
How much does temperature matter for the economics of an individual worker? The NBER, using 40 years of U.S. historical data, found per-capita income declined substantially on hotter days, driven by lost income on hot weekdays. (The fact that there was little relationship between hot weekends and lost wages is key evidence that temperature affects income and work productivity). Each day over 86oF reduced daily per-capita income by about $27 (adjusted for inflation), with earnings declining more substantially on the hottest days.
At a macro level, extreme heat has a well-described negative effect on economic growth. Studies from Federal Research Bank branches are useful for understanding how the economy can melt a bit in hot weather. A 2023 report from the Dallas branch is particularly useful for illustrating how extreme temperatures reduce economic growth (Figure 1). It’s unsurprising that “financial services” is little impacted by high temperatures; banking is done in air-conditioned buildings and online. However, “mining” is significantly impacted by high summer temperatures, especially in Texas. Oil and gas may be financed by bankers in air-conditioned buildings, but it is drilled and produced outdoors where worker productivity declines in the Texas summer heat.
The Federal Reserves’ 12th district, which covers Phoenix, Arizona, offers another example. The 12th district notes about 20% of Phoenix’s workforce is made up of “frontline workers” in outdoor occupations without regular access to air conditioning. These workers historically lose about 13 days of work annually due to extreme heat, a number anticipated to grow to over 40 days soon after mid-century.
The effect of extreme heat can even be quantified at a macro-economic level. The OECD – an organization of generally developed, wealthy countries that promotes economic growth and trade – conducted a large study of 23 advanced economies to do just that. The result points to a substantial negative effect on economic performance due to extreme heat. In fact, ten additional days above 95oF each year has a comparable effect on productivity as a 5% increase in energy prices, while one additional heatwave of 5 days or more has nearly the same effect. Moreover, the magnitude of the effect is greater on smaller business.
Cool Solutions for Hot Productivity
Generally pessimistic reports like that published by the OECD often offer a glimmer of hope: resiliency can mitigate heat-drive productivity loss. Often such resilience measures address workplace behavior, for example, by shifting work hours to cooler periods of the day. Such schedule adaptation is not always possible. Management practices, such as required worker cooldown and hydration breaks (and providing a suitable place out of the sun to take them), are another type of potential adaptation. When shifting work hours isn’t an option and rest breaks aren’t enough, personal adaptions such as wearing a cooling vest must be considered.
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About the author: Dr. Erik Patton holds a PhD from Duke University where he conducted research on the challenges rising temperatures pose for military training. An Army veteran, Erik has served in a variety of extreme climates ranging from deserts in the U.S. Southwest and Middle East (120oF) to Arctic conditions in central Alaska (-42oF).