“Climate change will demand significant adjustments of the German labour market”

Prolonged heatwaves, severe storms, rising sea-levels in the North- and Baltic Seas, forest fires – these are arguably the most visible consequences of climate change in Germany. While the impact on the labour market is less immediately apparent, climate change is already making itself felt in certain sectors. In a IAB Research Report Bernd Fitzenberger and Florian Hack outline the consequences of rising temperatures and extreme weather events for the labour market, while also discussing the economic opportunities which arise from these changes. The IAB-Forum editorial team asks about their findings.

Bernd Fitzenberger, Florian Hack, what are the negative impacts of the changing climate on the German economy?

Professor Bernd Fitzenberger, PhD, is Director of the IAB.

Bernd Fitzenberger: It is already clear that climate change is causing significant economic damage and income losses in Germany, leading to a decline in prosperity and causing personal injury. We even see an increase in fatalities. According to analyses by the International Labour Organization (ILO), the economic damage resulting from heat-related losses in productivity exceed all other adverse consequences of climate change. Furthermore, the frequency of extreme weather events such as heavy rainfall, droughts, and forest fires is increasing due to climate change. These events also cause economic damage and heighten risks to infrastructure.

Florian Hack is researcher in the IAB’s Occupations in the Transformation research group.

Florian Hack: We also see that the severity of economic losses varies across regions, sectors, and occupations, depending on their vulnerability. A study by the Potsdam Institute for Climate Impact Research suggests that the direct consequences of climate change could lead to an 11 percent decrease in Germany’s per capita gross domestic product by 2050. That would represent a substantial decline in prosperity. At the same time, adapting to climate change indirectly offers economic opportunities that could foster growth.

Climate-related disasters can trigger long-term migration flows and losses in income.

What does this mean for the German labour market?

Fitzenberger: So far, the impacts on the labour market in Germany are not clearly discernible. Despite rising temperatures, survey data from 2006 to 2018 show no noticeable increase in employee-perceived stress caused by adverse weather conditions. However, the survey only captures general weather-related stressors – such as cold, heat, wetness, and draughts – and these are not caused solely by climate change. Furthermore, it is still unclear whether factors are cancelling each other out – for instance, that an increase in stress due to extreme heat is offset by a decrease in stress due to cold weather.

Nevertheless, various studies do indicate that rising temperatures and heatwaves worsen working- and living conditions. This also impairs recovery periods. In addition, rates of illness and the incidence of accidents rise, leading to losses in productivity. Finally, sectors and regions that rely on winter sports are negatively affected by milder winters.

Hack: International research findings on natural disasters provide additional, important insights into labour-market effects, which are also relevant for Germany. For example, climate-related disasters can trigger long-term migration flows and drive income-losses that can only be recouped over the long term. The magnitude of these effects, however, depends on the extent of the direct consequences of climate change and on the measures taken to mitigate them. These countermeasures can, in turn, generate positive effects for the economy and for employment.

Workers in the construction industry as well as in agriculture and forestry face an increased health risk due to extreme weather events and exposure to UV radiation and pollen.

Which workers are particularly affected?

Fitzenberger: Workers employed in outdoor occupations – and therefore directly exposed to climatic changes – are particularly hard hit. This includes workers in the construction industry as well as in agriculture and forestry. They face an increased health risk due to extreme weather events and exposure to UV radiation and pollen. However, workers in poorly air-conditioned indoor environments also suffer from rising temperatures, which can lead to health risks and reduced productivity.

Are there any positive effects?

Hack: In certain sectors, extreme weather events can generate short-term economic stimuli – for instance, for companies involved in reconstruction efforts. Flood disasters are a case in point: in their aftermath, companies in the construction-, flood-protection-, and healthcare sectors initially experience increased demand.

We can also infer that economic adjustments to climate change are taking place by looking at the use of the seasonal “short-time work allowance” in Germany: the relative share of construction workers claiming this benefit declined between 2012 and 2023. We attribute this to increasingly mild winters, which facilitate longer working periods. However, the positive effects of milder winters could be offset by negative effects caused by extreme summer heat. As of now, the evidence on this topic remains inconclusive.

The direct consequences of climate change make significant economic adjustments necessary.

In your study, you speak of a “transformation shock.” What do you mean by that?

Hack: The direct consequences of climate change cause significant economic adjustments across the economy. In sectors negatively affected by climate change, we must ensure that workers remain employable. While some affected workers will lose their jobs – which can entail a long-term loss of earnings – the negative impacts of climate change can be mitigated by comprehensively adapting infrastructure and production capacities to higher temperatures and extreme weather events. This adaptation process entails costs but also offers economic opportunities. However, in certain areas, we face the additional challenge of skilled-worker shortages – workers who are qualified to effectively meet the demands posed by climate change.

Government support measures can significantly ease the process.

What should policymakers do to effectively support this transformation?

Fitzenberger: Government support can significantly ease the process. Targeted policy measures are needed to protect workers from climate-related impacts which harm health and reduce productivity. The state could, for instance, incentivise investments in better working conditions – such as measures to protect against extreme heat.

Opportunities for further training and professional development are also crucial. This applies particularly to professions and industries which are heavily affected by climate change – not least in order to unlock new job opportunities in other economic sectors. After all, new jobs will emerge, according to IAB analyses. So-called “green jobs” – found in sectors where production has a lower impact on the climate and environment – have already gained importance for the German labour market. Economic sectors that explicitly counteract the negative effects of climate change, such as those implementing flood- and heat-protection measures, will also benefit. Policymakers should drive transformation in this direction, as it could promote the development of competitive, future-oriented fields of business for Germany.

Literature

Fitzenberger, Bernd; Hack, Florian (2025): Aktuelle Folgen des Klimawandels für den deutschen Arbeitsmarkt. IAB-Forschungsbericht Nr. 8.

DOI: 10.48720/IAB.FOO.18.08.2026.01