The impacts of heat on labour supply, productivity, and earnings: insights from India

What happens to the human body when it’s exposed to relentless heat? According to India’s Meteorological Department, heatwaves occur in India when temperatures reach 40°C in the plains, 37°C in coastal areas, and 30°C in hilly regions. During such conditions, the body struggles to cool itself, leading to heat stress, dehydration, and, in severe cases, organ failure and even death. These extreme conditions, often lasting three or more days, can wreak havoc on health and livelihoods, particularly for those in vulnerable professions.

In his 2024 SANDEE Karl-Göran Mäler Memorial Lecture, Professor Eswaran Somanathan, renowned environmental economist and professor at the Indian Statistical Institute, Delhi, explored the far-reaching economic impacts of extreme heat, focusing on informal-sector workers in India. His findings reveal a stark reality: rising temperatures are eroding productivity, reducing earnings, and deepening inequality in low-income, high-temperature regions.

On 13 December 2024, the International Centre for Integrated Mountain Development (ICIMOD) hosted the Karl-Göran Mäler Memorial Lecture as part of the 48th SANDEE Research and Training Workshop.

Moderated by Soumya Balasubramanya, Senior Economist at the World Bank and SANDEE advisory committee member, the hybrid event drew participants from across South Asia and beyond.

Heat and economic productivity: a growing concern

Professor Somanathan provided a ‘helicopter view’ of existing literature on heat and its impacts on incomes and the economy. Drawing from macro and micro studies, he highlighted consistent evidence of sharp productivity declines with rising temperatures – effects that are disproportionately felt in low-income areas with hotter climates (generally above 30°C).

While global studies suggest that GDP growth drops by 1.7–2.5% per degree Celsius rise in temperature, the impacts are far more severe in poorer states or districts within India, where declines can reach up to 4.7%. These findings echo the reality of deepening inequality in the face of climate change, as the poor are the least equipped to adapt to extreme heat.

The informal sector: a vulnerable majority

The highlight of the lecture was Professor Somanathan’s recent study with his collaborator on informal-sector workers in Delhi during the summer of 2019. Over 80% of India’s labour force works in the informal sector, which lacks protections like climate-controlled workplaces, social insurance, or formal labour rights. This study captured daily records of both labour supply and productivity effects across two slum communities in Delhi.

The findings were alarming:

• On days with heatwaves, net earnings fell by 40%.
• Earnings declined by 19% for every 1°C increase in wet bulb temperature (the lowest temperature to which air can be cooled by the evaporation of water into the air at a constant pressure).
• Workers reported increased sickness, reduced hours of sleep, and heightened expenditure on coping mechanisms such as water or ice.

These effects were not simply limited to productivity loss; many workers could not go to work at all due to extreme heat, worsening income losses. The study underscored that over 320 million informal-sector workers globally face similar conditions for at least a month every year.

Policy implications: adaptation and mitigation

Professor Somanathan emphasised the need for urgent policy interventions to protect vulnerable workers. Recommendations included:

• Low-cost cooling solutions: Painting roofs white to reflect heat, improving access to water, and providing shaded rest areas at workplaces.
• Social insurance: Supporting workers who lose earnings due to heat-induced sickness or work absences.
• Long-term economic growth: Increasing incomes to enable greater investments in adaptive measures.

While adaptation remains vital, he stressed that mitigation, reducing global carbon emissions, is the most critical solution to address the root cause of rising temperatures.

Engaging discussion and closing remarks

The lecture was followed by a robust discussion, with participants raising critical questions on gender impacts, urban planning, and the role of social protections. Professor Somanathan noted that further research is needed on gender differences, particularly on women’s mobility and labour challenges during extreme heat.

In his closing remarks, Director General of ICIMOD, Dr Pema Gyamtsho, reflected on the importance of integrating economic analysis into climate action, particularly in the Hindu Kush Himalaya (HKH) region. He pointed to opportunities for future research on how warming temperatures might affect mountain economies, such as tourism and agriculture, while acknowledging the vulnerability of Himalayan communities to heat stress.

As a participant in the lecture, Tanu Gupta from the Indian Statistical Institute later reflected on the event, remarking:

“The lecture was thought provoking and addressed the critical issue of heat stress, which affects a large portion of the population in India. In Delhi, for instance, we see people falling sick or even losing their lives due to extreme temperatures. As someone researching air pollution and its impact on labour supply, I found the discussion on heat stress and its effects on labour market outcomes, particularly for informal workers, highly relevant and inspiring for my work.”

A call for regional action

The SANDEE Karl-Göran Mäler Memorial Lecture honoured a pioneer of environmental economics and brought urgent attention to a growing climate crisis. With heat impacts threatening the livelihoods of millions, particularly in the informal sector, Professor Somanathan’s research serves as a wake-up call for policymakers to prioritise equitable and evidence-based climate adaptation strategies.

As ICIMOD and SANDEE continue to build research capacity across South Asia, this lecture reaffirms the power of regional collaboration and research in shaping solutions for a sustainable future.