Bahrain is known to have extreme temperatures during the summer months. As a result, those who work outdoors in construction are exposed to the dangers of heat exhaustion, as well as potentially heat stroke if they are allowed to continue working outside in extreme conditions. As we approach the summer months and preparations are underway to ensure the safety of these workers (via policies such as bans on outdoor work during high temperatures), one must ask, to what extent will we face a drop in productivity during hotter conditions?
We devised two hypotheses for this. The first hypothesis is that when looking at the data, we will definitely see a drop in productivity in the summer months, as higher temperatures will A) affect work ability due to harder physical conditions, and B) Health and Regulation will not permit work when temperatures are in excess during midday, given the health risks of heat exhaustion and heat stroke. As a result, from the two channels, we would expect to see a decline in Real GDP per worker coming from the construction sector during this period.
The second hypothesis is that firms in the construction industry may have devised plans to adapt to the change in weather conditions. An example of this seen is the shift of construction work (when possible) towards the night time, where temperatures are more bearable. As a result, we should see that productivity will not have a noticeable change during hotter time periods. However, it is important to note that if hypothesis #2 is correct, it may not be immediately noticeable in the data. The reason for this is that, while working at night may allow for a recovery in lost time, not all construction may be done at night, therefore overall productivity will still fall (only being partly offset by working at night).
The results? We do see a drop in productivity during hotter quarters compared to cooler quarters.
In Quarter 3, where the average maximum temperature is 38 degrees, we see the largest decline in GDP per worker of 1.11% on average. Compare this to Quarter 1 in any given year, where we see on average a 0.29% increase in GDP per worker. However, while it appears that “productivity” is declining on average in hotter conditions, this doesn’t tell the whole story as productivity is a per worker measure, so we must take into account any changes in the number of workers over the quarters in order to make valid comparisons across them.
It should be noted that we see a large increase in employment figures during hotter months. In any given Quarter 3, we see an average increase in employment of 1.15%, while during the coolest months (being any given Quarter 1 of our dataset), we see a nearly zero percent increase in total employment in the construction industry. To the casual observer, it may seem perplexing that the construction industry hires more during the least productive quarters, but there are two plausible explanations for why this happens.
Firstly, given that productivity is falling during hotter conditions, construction firms react by simply hiring more workers to ensure that total output continues to be maximized, and that there is no significant drop in completion rates of projects. If construction firms simply kept their workforce size the same, there would be an even greater fall in total output, thus firms instead adjust by hiring more to ensure that the fall in output is minimized during this challenging period. A second potential explanation is that firms are forward-looking, and hire during times when productivity is falling in order to deploy these new employees in the next quarter where productivity is higher. This may be due to the need for some form of training for employees, causing firms to recruit workers in “hotter” periods to train, and then deploy them in “cooler” periods. As a result, the increase in hiring may be due to the combinations of reasons.
Overall, it appears that the first hypothesis seems to be correct in the sense that temperature appears to affect productivity, given the essential health and safety regulations imposed around outdoor work during extreme heat. We should also be cautious, as the full drop of productivity is not purely due to the consequences of the harsher working conditions, but rather some of it appears to be due to firms recruiting more employees during hotter months, thus affecting our measurement of productivity. It is important to note that we are looking at averages across all years in our dataset, and that this does not mean hiring, output, and productivity follow the same pattern year after year. Furthermore, it is important to note that temperature is one of many factors that may affect productivity, hiring decisions, and output in the construction industry. Therefore, for us to confirm such results, we would need to employ more powerful statistical analysis, of which would be seen in research papers rather than commentary pieces such as this one.
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