One-degree Celsius rise in annual temperatures may lead to two per cent drop in productivity levels of industrial units and climate change may hurt the Indian manufacturing sector owing to heat stress on workers, a new study has said.
The study by the Energy Policy Institute at the University of Chicago used several high-frequency micro-data sets of worker output and a nationally representative dataset of more than 58,000 factories across India.
The researchers found that there is around two per cent drop of productivity for every one-degree rise in annual temperature.
"The greatest declines occurred in labour-intensive plants," the study said.
This multi-year study indicates that climate control in the workplace removes productivity declines but not absenteeism, presumably because workers remain exposed to high temperatures at home and outside. And the fact that climate-control is expensive, makes its use limited, it said.
"The effect of high temperatures on lower crop yields has been previously established. This paper shows that rising temperatures can also hurt economic output in other sectors by reducing the productivity of human labour.
"The damage is greatest when already warm days become hotter. If India wishes to succeed in becoming a manufacturing powerhouse using cheap labour, we need to think hard about how we can adapt to a hotter world," said Dr Anant Sudarshan, South Asia Director of the Energy Policy Institute at the University of Chicago.
Dr Sudarshan co-authored this study with researchers E Somanathan of the Indian Statistical Institute, Delhi, Rohini Somanathan of the Delhi School of Economics, and Meenu Tewari of the University of North Carolina at Chapel Hill.
Talking about how the future look like, Somanathan said it is entirely possible that the industrial sector might respond to high temperatures by increasing automation and shifting away from labour-intensive sectors in hot parts of the world.
"These adaptive responses may negatively influence wage inequality," Somanathan added
Echoing a similar concern, Sudarshan added, "The trends that we see in our data makes us think that warm countries in the developing world may face a pervasive and 'heat tax' that could damage the competitiveness of their manufacturing sectors and further hurt the wages of poor workers.