Impacts of Extreme Heat on Labor Force Dynamics

TL;DR

This study investigates how extreme heat impacts labor force participation and work hours in Australia, revealing significant reductions in attendance and hours, especially in certain industries and regions, with implications for climate adaptation.

Contribution

It employs a within-worker longitudinal approach to quantify heat effects on labor dynamics, highlighting industry-specific and regional variations in heat-related labor impacts.

Findings

High temperatures significantly reduce work attendance and hours.

Effects are more pronounced in cooler regions and recent years.

Outdoor and commute periods are key mechanisms for heat impacts.

Abstract

We use daily longitudinal data and a within-worker identification approach to examine the impacts of heat on labor force dynamics in Australia. High temperatures during 2001-2019 significantly reduced work attendance and hours worked, which were not compensated for in subsequent days and weeks. The largest reductions occurred in cooler regions and recent years, and were not solely concentrated amongst outdoor-based workers. Financial and Insurance Services was the most strongly affected industry, with temperatures above 38{\deg}C (100{\deg}F) increasing absenteeism by 15 percent. Adverse heat effects during the work commute and during outdoor work hours are shown to be key mechanisms.