Here’s How Heat Waves Affect Economies

It’s hot outside. Not just summer hot—brutally hot. And it’s not just your area, it’s pretty much everywhere.

The Pacific Northwest is hitting record highs. New York and Philadelphia set new records. London has seen days over 100 degrees Fahrenheit. Wichita Falls, Texas hit 115 on July 19. China has issued its highest heat alert for nearly 70 cities. And in India, the high in Delhi hit 121 in May—a temperature so hot that birds fell from the sky.

It’s a bit more than we’ve come to expect in the year’s hottest months. And while it’s a terrific excuse to avoid cutting the grass or to utilize the pool, the story for businesses is a much different one. Extreme temperatures carry an economic impact, and it’s bigger than you might imagine.

While there’s no estimate for the recent swath of sweltering weather, the European Environment Agency (EEA) estimates that, between 1980 and 2000, heat waves in 32 European countries cost up to $71 billion.

A more recent study, conducted in 2021 by European economists and climate experts, estimates that heat waves, again in Europe, lowered the annual gross domestic product by as much as half a percent in the past decade.

Part of the issue is productivity. They’re not called the lazy, hazy days of summer for no reason. The warmer it gets outside, the less people want to work, which impacts their output. One recent survey found that states' GDP falls by 0.25% for every degree the thermometer moves above the average summer temperatures.

In fact, the International Labour Organization predicts that by 2030, “the equivalent of more than 2% of total working hours worldwide [will] be lost every year, either because it is too hot to work or because workers have to work at a slower pace.” That works out to the loss of 80 million full-time jobs, says Phys.org. And it carries a cost of $2.4 trillion, nearly 10 times the heat-related productivity loss of 1995.

In some tropical regions, in fact, outdoor work may become impossible by the end of the century for as many as 250 days each year, according to the UN's Intergovernmental Panel on Climate Change.

Of course, the human cost of heat is just as (if not more) significant. There are obvious examples, such as workers who, as part of their job, are required to be outside, increasing the risk of heat stroke, heat exhaustion or even death. Between 1998 and 2017, more than 166,000 people died as a result of heat waves, says the World Health Organization.

This is not a problem that’s likely to go away soon, either. The rise in global temperatures increases the odds of extreme heat waves in coming years, which will put even more demand on power grids and challenge workers in ways that will be increasingly difficult to overcome.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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