Summer 2021 is expected to be one of the hottest on record, with all-time high temperatures in dozens of Western cities. The extreme heat that is affecting many parts of the United States is killing hundreds of people, causing wildfires, and worsening drought conditions in more than a dozen states.

As an economist who has researched the effects of weather and climate change, I have examined a large body of work that connects heat to economic outcomes. Here are four ways that extreme heat harms the economy – as well as some good news.

  1. Growth takes a hit

According to research, extreme heat can have a negative impact on economic growth.

A 2018 study, for example, discovered that the economies of U.S. states grow at a slower rate during relatively hot summers. According to the data, annual growth falls 0.15 to 0.25 percentage points for every 1 degree Fahrenheit above normal in a state’s average summer temperature.

When the weather is hotter, workers in weather-exposed industries such as construction work fewer hours. Higher summer temperatures, on the other hand, dampen growth in many industries that rely on indoor labor, such as retail, services, and finance. When it’s hot outside, workers are less productive.

  1. Crop yields drop

Agriculture is obviously weather-dependent: after all, crops grow outside.

While temperatures between 85 and 90 degrees Fahrenheit (29 and 32 degrees Celsius) can benefit crop growth, yields plummet when thermostats are raised even higher. Corn, soybeans, and cotton are among the crops that have suffered greatly as a result of the extreme heat. These yield reductions could be costly for US agriculture.

A recent study, for example, discovered that an additional 2 degrees Celsius of global warming would wipe out profits from an average acre of farmland in the Eastern United States.

The collapse of Russia’s wheat harvest in response to the country’s 2010 heat wave was a prominent example of this, raising wheat prices around the world.

  1. Energy use soars

Of course, when it’s hot, people and businesses use more energy because their air conditioners and other cooling equipment are turned on full blast.

According to a 2011 study, just one extra day with temperatures above 90 degrees Fahrenheit increases annual household energy use by 0.4 percent. More recent research indicates that energy use increases the most in hotter areas, most likely because more households have air conditioning.

This increase in electricity use on hot days strains power grids at a time when people rely on them the most, as seen in California and Texas during recent heat waves. Blackouts can be costly to the economy because food and other goods can spoil, and many businesses must either run generators or shut down. For example, the 2019 California blackouts are expected to cost $10 billion.

  1. Education and earnings suffer

Long-term effects of rising temperatures include how they affect children’s ability to learn – and thus their future earnings.

According to studies, hot weather during the school year lowers test scores. Math scores continue to fall as the temperature rises above 70 degrees Fahrenheit (21 C). Reading scores are more resistant to high temperatures, which is consistent with how different regions of the brain respond to heat, according to this study.

According to one study, students in schools without air conditioning learn 1% less for every 1 degree Fahrenheit increase in the school year’s average temperature. It was also discovered that minority students are disproportionately affected by hotter school years because their schools are more likely to lack air conditioning.

Lost learning leads to lower lifetime earnings and undermines future economic growth.

In fact, the effects of extreme heat on development begin before we are born. Adults who were exposed to extreme heat as fetuses earn less over their lifetimes, according to research. Each additional day with an average temperature above 90 F (32 C) reduces earnings by 0.1 percent 30 years later.

In other words, as temperatures rise, economies will suffer even more.