How will climate change affect work in developing countries?

Work is the main source of income for most people and a key driver of economic growth, particularly in developing countries. The effects of climate change on labor are significant and multifaceted, with implications for economic performance and poverty. Our recent paper explores the various ways in which climate change affects work and suggests avenues for research and policy action.

Limitations of existing work and the role of adaptation

The current research on labor and climate change has notable limitations, including a general neglect of adaptation strategies. Studies typically rely on fixed effect estimation, which captures the immediate, short-term, direct effects of past climate events. These estimations may not accurately reflect long-term impacts, especially if significant adaptation occurs, effects ensue across the economy or if climate change intensifies. A small body of research aims at tackling the latter two concerns by applying general equilibrium analysis and simulating future outcomes.

In addition, a small but growing body of research is examining how firms, farms, and households are beginning to adapt, whether by adopting new technologies or altering existing practices. For example, to mitigate heat's impact, some firms might implement cooling technologies, though costs can be prohibitive for those with low-profit margins; others may consider relocating. Farms are adapting through irrigation, altering inputs like fertilizers, seeds, and crops, or planting trees, but the effectiveness of and barriers to these strategies remain poorly understood. Rural households adopt strategies like using their savings, reducing consumption, or borrowing to cope with climate-induced income shocks, but these strategies often fall short of providing complete financial protection, and their effectiveness and optimal implementation remain unclear, highlighting a need for further research.

How can - and do - governments respond?

Governments can respond to the pressures that climate change imposes on labor by implementing a variety of labor targeting policy strategies:

1. Promoting green Jobs: Implement policies that stimulate labor demand in the transition to a low-carbon economy. To effectively compare the impacts of different studies, greater comparability across measures and methodologies is needed.
2. Developing green skills: The transition to a low-carbon economy requires the acquisition of new green skills. Purposefully designed training programs and skill development initiatives in this area can support and accelerate the transition.
3. Implementing cooling technologies: Introducing cooling technologies in workplaces can boost worker productivity, increase labor supply, and improve worker well-being. Although adoption of this labor-focused adaptation may be low in low-productivity jobs, government subsidies could help offset the high initial costs, encouraging broader implementation..
4. Regulating occupational health: Regulations that protect workers from heat-related stress - such as mandating frequent rest breaks, ensuring proper hydration, and supporting high-sodium intake - can help maintain worker health, though enforcement may remain weak, particularly in the informal sector.
5. Flexible work regulations: Flexible working arrangements can provide workers with the option to work during cooler times of the day or on cooler days, helping to manage heat-related stress. Relaxing the "consecutive vacation days" requirement allows workers to choose their days off, potentially reducing absenteeism. This increased flexibility is particularly beneficial for individuals juggling multiple jobs, such as those working in both agriculture and trade, as it enables them to adjust their hours to focus on less exposed activities during extreme temperatures.
6. Enhancing labor market integration: Improving labor mobility across sectors can help workers transition to jobs and areas less affected by climate change.
7. Social protection: measures can mitigate vulnerability and ease transitions for affected individuals. Shock-responsive social protection, in particular, provides a more effective response to sudden environmental shocks, ensuring critical support during times of need.

These policies can help mitigate the impact of climate change on labor markets by targeting labor directly, and their formal evaluation would improve our evidence base. More general climate change policies, which do not explicitly target labor, may also have an impact on work, a facet often neglected in the evaluation of these policies.

Table 1. Labor targeting climate change policies

Ways forward: The future of labor in a changing climate

The nexus between climate change and labor is an increasingly vital field of study. We see four promising directions for future research:

1. Deepening existing knowledge in areas with some but limited understanding: Enhancing our understanding of adaptation and refining causal analysis of the labor impacts of climate change are essential. Detailed sector-specific and economy-wide studies can shed light on how climate change might spur employment in emerging sectors like green energy, on the extent of its impact on productivity, and on the opportunities it offers for accelerating structural change.
2. Broadening knowledge in areas with advanced evidence: Replication and comparison are needed in areas where we have good evidence, such as the impact of climate change on employment in agriculture, as well as heat-exposed manufacturing; and a more detailed understanding of the causal impact of climate change on migration, accounting for confounding factors.
3. Prioritizing further evidence gaps: Identify and prioritize pressing questions and data gaps in areas with limited evidence. One example is the employment effects of climate change in sectors that are undergoing significant change, like the transport sector, and are poorly understood. Another example is the impact on earnings and income variability for the self-employed and across different income levels, which remains unclear.
4. Formal evaluation of labor-targeting policies and of the labor impacts of general climate change policies remain scarce and would benefit from more systematic study.

In conclusion, while challenges remain, clear pathways have emerged that can guide us toward understanding and addressing the impact of climate change on work in developing countries.