Surviving the Daily Heat: Climate Change and Labor Productivity

Climate change pose significant risks to workers. Although workers in the formal sector can often mitigate heat exposure through climate-controlled workplaces, the same is not true for workers employed in informal and heat-exposed occupations. As a result, the economic costs of rising temperatures are likely to affect these workers disproportionately. This concern is particularly relevant in low- and middle-income countries such as India, where nearly three-quarters of workers are employed in informal jobs. This study examines the impact of high temperature on the labor supply and productivity of daily-wage workers using the 2023-24 Periodic Labor Force Survey (PLFS) of India, which provides a seven-day panel of worker's labor outcomes. We find that when weekly maximum temperatures exceed 35.C relative to 20-25.C, weekly earnings decline by approximately 5%, despite no significant reduction in total hours worked. Furthermore, exploiting the panel structure of data, we find that hours worked decline by approximately 13 minutes per day under extreme heat. In addition, daily earnings fall by 4%, and the probability of working declines by 0.3 percentage points. We do not observe similar effects among salaried or self-employed workers. Our findings highlight the unequal burden of climate change on workers in informal sector and highlight the need for targeted heat adaptation policies to safeguard incomes and worker productivity in a warming climate.