As climate change impacts workers, employers have an opportunity to act

A continued increase in the frequency and severity of extreme or unusual weather events has implications for worker productivity, employers' bottom lines, and employees' financial security. 

In spring and summer 2023, the world was experiencing its hottest summer on record, with unprecedented heat waves roiling the U.S. and the globe. Extreme drought led to wildfires across Canada for much of the year, with the effects of toxic smoke reaching as far as New York City — which, for a time, had the worst air quality in the world. These fires also spread to the Midwest, the Great Lakes, and other parts of the Northeast. 

Throughout this time, the team at Commonwealth was working on a report and survey that demonstrated the devastating impact of climate change on workers' financial situations, livelihoods and well-being — particularly those earning low and moderate incomes (LMI). 

Read more:  15 jobs getting the biggest raises in 2024

In 2021, for example, employers lost more than 2.5 billion hours of labor across agriculture, construction, manufacturing, and service sectors due to heat exposure. Additionally, a 2020 report indicated that the U.S. loses an average of $100 billion a year due to heat-induced declines in labor productivity. More recently, a new report from the U.S. Treasury forecasts that climate change will cause significant financial strain to households in the coming years, citing reduced earnings and access to employee benefits as a concern.

Climate change research often focuses on the cost of damage to infrastructure and physical assets, but to get the full picture, we must study the impact of extreme weather on workers' financial security — especially front-line, hourly workers typically earning low and moderate incomes — and the related effects on their employers' bottom lines. In turn, when workers' financial security and firms' profitability are affected, there are broader implications for our economy.  

With so much at stake, there's an urgent case for employers and other institutions to consider how they might mitigate the household financial impact of extreme weather events.

In our initial research findings, a jaw-dropping 81% of workers agreed that extreme or unusual weather is becoming more common because of climate change. Over half of workers surveyed in  Feeling the Heat: Climate Change's Impact on Worker Financial Security reported that extreme weather is negatively impacting them, their family members, and those they know. Individuals identified impacts such as short- and long-term finances, education, and living situations. Nearly  half of respondents said they have become less secure in their finances, and 28% said they have lost their financial stability altogether. 

Read more:  Invest in offboarding strategies to minimize layoff trauma

The impact of extreme and unusual weather reverberates, interrupting the core elements of a productive, efficient workforce and undermining equity. In our survey, 28% of workers living on LMI reported not being able to get to work, 21% had to use paid time off, 18% had their hours reduced, and 11% had to use unpaid time off. In addition, workers who are Black and Latin are disproportionately impacted, with 58% of Black and 52% of Latin workers saying their work had been affected by climate change as compared to 46% of white workers.

The numbers in our research demonstrate the potential for economic losses that ripple through the workforce. A loss of financial stability means a potential loss of housing security for workers earning LMI, increased financial stress, or the inability to access reliable transportation. These have consequences for employers as well, as it becomes increasingly difficult to tap into a stable, reliable workforce. But respondents also painted a picture of opportunities for institutions — and employers in particular — to help mitigate the financial impact of climate change on workers earning low and moderate incomes. 

Read more:  After a devastating hurricane, I learned to navigate crisis in the benefits business

Employers are widely acknowledged to play a critical role in the financial security of workers. From retirement plans to health insurance and, more recently, emergency savings, employer-sponsored financial well-being initiatives are popular with employees, and understood to have a positive impact on employer bottom lines where it matters most: productivity, loyalty, and employee engagement.

Based on the responses in our survey, the financial impact of climate change is an area that employers should be attuned to as well. Workers are looking to their employers to mitigate the financial effects of extreme weather, with more than 80% calling for an expanded employer response, such as weather-related time off, schedule flexibility, and financial resources. As they do in other areas of employees' overall well-being, like health and finances, employer-led benefits can play a key role in mitigating climate impact as well.

Respondents also called upon financial institutions and the government to play a role in reducing financial stress from extreme or unusual weather events. While only a handful of workers have received support from financial institutions after experiencing extreme or unusual weather, 23% feel they should be providing aid. Meanwhile, 73% of workers surveyed say the government has a role to play in supporting those impacted by climate change.

The findings of this study align with our prior research, which highlights the pivotal roles of institutions — and employers in particular — in helping shore up the financial security of workers earning low and moderate incomes. As climate change weighs ever more heavily on workers' financial situations, it's a natural next step for employers to invest in the resilience and productivity of their workforces by mitigating the financial impact of extreme weather. It's also an investment workers themselves believe in, and aligns with their sense of hope: Over 60% of those we surveyed believe that "we as a society can solve this climate crisis."