Climate Change Threatens Labor Productivity, Economic Growth, Federal Reserve Warns


Wind turbines work in Livermore, Calif., Aug. 10, 2022. Federal energy regulators on Monday, May 13, 2024, approved a long-awaited rule to expand the amount of renewable energy such as wind and solar power that is transmitted to the electric grid, a key part of President Joe Biden’s goal to decarbonize the economy by 2050. (AP Photo/Godofredo A. Vásquez, File)
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(AURN News) – Climate change and increasing extreme heat pose a severe risk to labor productivity, particularly in outdoor industries like construction, threatening to hamper economic growth in the coming decades, according to a new analysis from the Federal Reserve Bank of San Francisco.

In a recent economic letter, the San Francisco Fed pointed to mounting evidence that extreme heat is already taking a toll on worker productivity, especially for those toiling outdoors in sectors like construction. The productivity losses, if left unchecked, could have cascading and long-lasting effects on the broader U.S. economy.

“The labor productivity losses in construction today could have long-lasting effects on the U.S. economy because construction is important for investment,” the letter stated. “If extreme heat lowers investment today, then it will slow the accumulation of capital for future use and have long-lasting impacts on economic outcomes.”

The San Francisco Fed’s analysis also highlights that by the year 2200, the U.S. capital stock would be 5.4% smaller and annual consumption 1.8% lower than it would have been without the extreme heat impacts. Capital stock refers to the total amount of machinery, equipment, and other productive assets retained for future production.

“Decreases in construction productivity slow capital accumulation and therefore have long-lasting effects on macroeconomic outcomes,” the authors wrote.

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