Hope King, author of Axios Closer
Aug 18, 2022
Source: Axios
Photo / Image Source: Unsplash,
Extreme weather worsened by climate change is a hidden cause of inflation, threatening to push up already high prices of everything from food and clothing to electronics.
Why it matters: Heavy rainfall, flooding, heat waves and droughts erode agriculture, infrastructure and workers' ability to stay on the job — all of which lead to supply-chain breakdowns and worker shortages.
Between the lines: Extreme weather is affecting both the supply and demand sides of the economy, Tamma Carleton, a professor of environmental economics at UC Santa Barbara, tells Axios.
Research hasn't yet quantified the exact impact extreme weather has on inflation. Some changes, such as the price of agriculture, are easier to pin down, while others — such as worker productivity — are harder to detect.
When people take longer breaks to recover from heat exhaustion, or leave 15 minutes early, for example, it adds up day after day, Carleton said.
The big picture: As the pandemic has shown, disruption to supply chains and workers' productivity drives up the cost of doing business. And one way or another, companies pass those costs onto consumers.
Workers facing more strenuous conditions tend to command a higher wage, Solomon Hsiang, a professor of public policy at UC Berkley, says.
And if companies have to pay more to protect them or install new equipment like air conditioning in warehouses, "someone's got to pay and at the end of the day that someone is usually the consumer."
Threat level: Long-lasting heat waves like the ones in the U.S. and China are expected to become more commonplace — just as global inflation is leading to a slowdown of economic growth.
How can climate change impact your company? Why? How can you impact climate change?
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