The heat hurts European salaries and curbs economic growth economy

The current heat wave in a number of European countries is putting pressure on their economies, especially with regard to household income, corporate productivity, agricultural crops, insurance costs, and public spending. The extreme heat wave that struck Western Europe has broken records in France and Britain.

The French Meteorological Authority stated that 61 French departments remained under the red alert level due to the heat wave today, Friday, and 22 departments were at the orange alert level, with the heat remaining stifling in a large part of the country and recording temperatures between 35 and 39 degrees Celsius in general, and locally it may reach 40 or 41 degrees in the shade from Auvergne and Burgundy to southern Ile-de-France and the Grand Orient.

In Britain, the Meteorological Authority said that the heat wave prompted it to issue a red alert for extreme heat in parts of central and southern England and Wales, expecting to break the temperature record this June, while the Dutch Meteorological Authority announced a red alert for extreme heat in large parts of the country, with temperatures that could reach 40 degrees Celsius locally.

Reuters reported that the heat wave closed schools, slowed the movement of trains, cut off electricity to thousands of homes in France, and prompted some farmers to harvest grains at night to avoid hours of extreme heat.

Starting from income

A study published in the journal Global Environmental Change last May showed that heat waves and droughts increased the risk of poverty in Europe by about 1.1 percentage points, or the equivalent of 5.6 million additional people during the period from 2004 to 2022 on average.

The study relied on European household income data and high-resolution data on heat and drought, and concluded that the combination of the two phenomena harms household income more than each of them occurring alone.

Climate Analytics, a non-profit organization from which researchers participated in the study, says that the combination of heat and drought reduced the average income of families in Europe by about 3%, compared to what would have happened if these climate events had not occurred, with greater losses in the most exposed areas. The impact on income in Madrid reached about 10%, in central Spain 8.8%, and in central Hungary (Hungary) 9.4%.

The heat hits low-income groups first, because a larger percentage of these groups work in agriculture, construction, field services, and transportation, as the worker cannot transfer his job to an air-conditioned office or work from home, according to the study.

The study found that households in the poorest 20% of the population suffered an income loss 2.7 percentage points greater than households in the richest 20%, when heat waves and droughts combined.

Compact productivity

Heat reduces actual working hours even if companies do not officially stop. The worker slows down the pace of performance, needs longer rest periods, and increases the risk of heat exhaustion, sunstroke and heart disorders, effects that ultimately translate into less production and lower wages or higher costs for the employer, according to the European Commission’s Joint Research Center.

The center estimated that by mid-century, 22 European regions may experience annual labor productivity losses exceeding 1% due to heat stress, and the number may rise to 107 regions by the 1980s. In the worst-case scenario, productivity losses in the Spanish region of Murcia could reach 6%, while some regions of southern Europe could lose up to 4% of regional GDP.

Heat stress occurs when the body is unable to cool itself and get rid of excess heat, which leads to the body’s internal temperature rising above its normal rate.

The Organization for Economic Cooperation and Development concluded, in a recent working paper based on company and weather data in 23 advanced economies between 2000 and 2021, that the increase in high temperature days and the occurrence of heat waves reduces labor productivity, and that the effect is greater in smaller and less productive companies, and increases with the length of the heat wave, high humidity, and weak winds.

Additional cost

Drought worsened in Europe in late May 2026, with a prolonged heatwave over the Iberian Peninsula (Spain and Portugal), Britain, France, the Alps and Italy, and warning conditions extending or stabilizing in northeastern Europe, western Russia and Britain, according to the European Drought Observatory.

The “Drought in Europe – May 2026” report issued by the Joint Research Center showed that soil moisture and river flows were below normal rates in European regions, with negative effects on vegetation and crops, and varying expectations for yields (crops) between countries that may record above-average production, and others below average.

Reuters reported that the current heat wave caused power outages in France, while Bloomberg said that the wave tested electricity networks and health services in Western Europe.

Bigger bill

The European Environment Agency estimated the economic losses resulting from extreme weather and climate events in the European Union at about 822 billion euros between 1980 and 2024, including more than 208 billion euros between 2021 and 2024 alone. The agency said that the last four years were all among the five largest years in terms of annual losses since 1980.

The European Environment Agency says heatwaves are responsible for about 95% of deaths related to extreme weather in Europe, and that climate events put pressure on health, nature, water and food supplies, infrastructure and the economy. The problem appears in public budgets through the cost of health emergencies, disaster compensation, infrastructure protection, and support for families and businesses after heat waves and drought.

The European Union’s Copernicus Climate Change Service confirms, in its State of the European Climate 2025 report, that Europe is the fastest warming continent in the world, and that at least 95% of the continent will see temperatures above average in 2025.

The Climate Analytics study expects that the impact on income will remain relatively limited if global warming is limited to 1.5 degrees Celsius, but it will expand sharply under the current policy path. European household income could fall on average by 7% in a 1.5 degree scenario, compared to 27% if warming reaches 2.7 degrees by the end of the century, with more severe losses in Greece, Spain, Romania, Bulgaria and Cyprus.

Global warming or global warming is the phenomenon of a gradual and continuous rise in the average temperature of the Earth’s atmosphere and oceans.