Extreme heat poses a billion-dollar threat to Australia’s economy

Heat is costing the Australian economy through productivity losses. Heat stress image from www.shutterstrock.com

When heat waves hit in summer, do you have trouble sleeping? And the next day, even though you are working in air-conditioning, are you a bit slower, your judgement a bit off, or your patience a bit frayed?

In a paper published today in Nature Climate Change, we and colleagues show that heat stress probably cost the Australian economy nearly A$7 billion in 2013-2014 through productivity losses such as those we’ve mentioned above.

That bodes ill for the future, with heatwaves forecast to get hotter and more common thanks to climate change. While we should continue to attempt to mitigate climate change, we need to take steps to adapt.

One of our most surprising findings is that you don’t have to work outside to feel the heat. Although outdoor workers report greater levels of productivity losses from heat, indoor workers aren’t immune. Poor sleep is one possible explanation.

The real cost of heat

Regardless of the reason, productivity loss from heat was a major cost to the Australian economy in 2014. Of 1,726 respondents sampled randomly from the Australian population, 7% did not go to work on at least one day in the previous 12 months because of heat stress.

Ten times that number (70%) went to work but thought they were less efficient. On average people were less productive at work because they felt heat stressed on 10 days per year and cumulatively also lost about 27 hours per year. When the sample is extrapolated to the Australian working population, heat stress costs the nation A$6.9 billion per year in lost productivity.

This figure is conservative. It does not include productivity loss among those younger than 18 or older than 65, nor does not include the effects of heat on voluntary work or home duties. It also does not account for the economic impacts of people being less active in their leisure time, which is also likely to affect their well-being.

But it does include the efforts of workers to make up for time lost when it was hot – as many people feel compelled to do if they are to meet work obligations, even though it eats into their private time.

Heat illness

These losses put the cost of heat stress on a par with the cost of chronic health conditions such a migraines or back pain. These comparisons with disease are entirely apt because the heat survey was modelled on a disease burden questionnaire, the first time heat has been treated in this way.

Previously heat stress productivity losses have been calculated purely from physical models that rely on estimating the physiological impacts of heat and humidity rather than asking people how they respond to heat in real life.

Of course responses vary enormously. Some people soldier on whatever the weather, others wilt with the first bead of perspiration.

Curiously the outdoor heat effect was particularly strong among men – far fewer of the small percentage of women who worked outside acknowledged much heat stress.

Of those working indoors, the loss of time amongst managers cost employers most. This was partly because managers were better paid, so each hour lost cost more, but also possibly because heat increased stress levels and affected many skills a good manager needs – such as judgement. Indeed this may be another underestimate – we could not estimate the costs of poor decisions by heat-stressed managers or staff.

Adapt now

It could be argued that the high value of the losses in 2014 was because it was a record hot year. The trouble with that argument is that ten of the warmest years on record for Australia have occurred since 1998, with predictions of many more to come. Heat may be expensive now. All the climate projections suggest that this is only just the start.

Fortunately, while the world edges towards climate change mitigation, adaptation is still possible.

The first step for employers is to recognise that heat is a problem. Setting threshold levels of Wet Bulb Globe Temperature (WGBT) above which work must stop is one way of managing heat in the workforce.

But our results suggest that productivity is reduced long before the workplace becomes unsafe and that the workplace may not be the only environment affecting productivity.

In particular heat effects are not confined to outside workers. This implies, just as with many medical conditions, that workers’ activities away from the workplace should be something in which employers take an interest.

Perhaps there will come a time when it is in employers’ interests to subsidise worker air-conditioning in the home. Employers should also make special effort to ensure workers, including managers, get enough water, pace themselves in response to high temperatures and are trained in how to cope with heat.

Modelling using just the wet bulb globe temperature data suggests that labour productivity in hot countries will decline by up to 20% by 2050 as the climate warms.

By 2080 losses globally may be 11-27%, even though some cold countries may benefit from greater warmth, and a recent report suggested that productivity losses from heat stress will be climate change’s biggest economic impact.

Given that productivity improvement is seen as one of the keys to economic growth, rising temperatures can be viewed as a substantial and increasing threat to the Australian economy.