The Hidden Value of Social Security Disability Insurance: Why It’s Important During Benefits Enrollment
![Contemplating a storm, and the effects of climate change. Income Matters.]()
The Future of Work through Three Lenses: Climate Change, Artificial Intelligence & Disease
by Margaret O’Neill, SmithGroup
Part I: Climate Change
This paper, focused on climate change, is the first in a 3-part series that considers the potential headwinds and tailwinds affecting work, as we know it in America. The paper will delve into the various ways work is shifting, focusing on specific industries affected and the potential gains and losses as a result.
The future of work in America is changing at a break neck speed. There are many forces at play affecting how, when, where and why we work. Throughout U.S. history, the workforce and the nature of work has evolved. Consider the industrial unrest of the late 19th and 20th centuries undoubtedly contributed to by low wages, long hours, unsafe working conditions, and irregular work. The creation of the U.S. Department of Labor (along with unionization) helped to mitigate worker and workplace discord by monitoring, tracking and supporting legislation. Even with historical context, the ways work and the workplace is changing feels like it is somehow more profound today. Perhaps it’s the sheer speed at which the world is currently moving, or maybe it’s the unpredictability of work life, like when a virus turned pandemic hits American shores. While there are a myriad of factors influencing the U.S. economy and work in general, there appear to be three over-arching issues that are already altering the nature of work and work life in America: climate change, artificial intelligence and the threat of another, more devastating pandemic.
Each of these issues is layered and complex. Understanding them fully is for the experts. This paper will explore how climate change is creating opportunities and challenges for the U.S. economy, workforce and disability risk.
The Climate Change Backdrop
Globally, January 2023 was the seventh-warmest January in the 174-year National Oceanic and Atmospheric Association (NOAA) record. Furthermore, the National Centers for Environmental Information states that it is virtually certain (> 99.0 %) that the year 2023 will rank among the 10-warmest years measured.1
Extended records about the climate paint a worrying picture of changes to date. Global average surface temperatures have risen by around 2°F since preindustrial times and more than 1°F in the last few decades.2 In fact, according to the instrumental record of temperatures stretching back to the 1880s maintained by the NOAA, nineteen of the twenty warmest years on record have occurred since the year 2000.3 It is also worth noting that the United States is warming faster than the global average, as are many higher-latitude countries (i.e., countries further from the equator). Since the late 1970s, the United States has warmed between 0.29°F and 0.46°F per decade.4
There is little doubt that climate change’s impact to American life including how, when, where and the ways we think about work have become and will continue to be significant.
The Impact to the U.S. Economy
Climate change will affect the American people in different ways. Given the national data collected by the NOAA, Environmental Protection Agency (EPA) and other sources, as well as the unprecedented weather events in the last decade, it is likely that the U.S. will exhibit losses no matter what the level of warming.5 Climate impact maps and news reports infer that no part of the country will be safe.6 A hurricane in Florida or Texas requires federal assistance, as does flooding in California or a heatwave in the Midwest. The potential losses could be staggering. From agriculture to energy to transportation, climate change will leave very few industries unscathed.
A Congressional Research Service report prepared for Congress in April 2022 states that two of the major ways that climate change affects the GDP are through productivity and investment effects.7 Productivity is integral to long-term economic growth—as productivity rises, more goods and services are produced with the same level of resources, which tends to improve well-being and income. Business investment is also a determinant of long-term growth as it contributes to the “domestic capital stock (the sum of both private and government fixed assets), which is directly related to the economy’s overall productive capacity.”8 The 2022 report underscores the impact of climate change on the economy:
Research suggests that climate change could negatively impact productivity and business investment, as rising temperatures and heat waves could result in lower output per worker. Declines in productivity and production could decrease businesses’ incentive to invest, particularly in a scenario in which physical capital is routinely damaged or destroyed due to the effects of extreme weather events to a point where further investment becomes unattractive. Climate change can also bring some benefits (such as fewer extreme cold events) and opportunities (opening of Arctic shipping lanes), although the net effects of climate change on the economy are generally expected to be increasingly adverse and widespread on net. Climate change—notably the projected increase in certain extreme weather events—is also expected to affect the overall economy through its impacts on specific sectors, such as housing, infrastructure, and agriculture.9
Industries have experienced financial losses due to climate change across nearly all sectors, but some rise to the top:
Real Estate: According to the Federal Reserve, the market value of owner-occupied real estate rose to $43.5 trillion in the fourth quarter of 2022, up from $39.2 trillion a year previously and $17.4 trillion a decade previously.10 This amount is nearly double the size of annual GDP in 2020.11 Consider then, that according to a 2021 report by Corelogic, “nearly one-third of the U.S. housing stock could be at high risk of climate-change-induced hazards, and billions of dollars of property are vulnerable to complete destruction or being rendered unusable by flooding risk alone.”12 Increases in frequency of hurricane activity and intensity has the potential for a higher risk of damage to property and ultimately increases in property insurance rates and impacts valuation.
The costs of maintaining property in all of these areas are increasing as well. Costs of repairs are higher and more frequent, insurance premiums start to skyrocket, all while real estate prices and rents increase in neighboring areas that are unaffected by these impacts. This highlights the issue of equity in relation to climate change in the U.S.
Construction: Weather has always been a factor for the construction industry, but as climate change accelerates, the impacts are greater.
New, greener and more durable materials are being used to try to mitigate the risk, but they are often more costly and fewer in the industry have experience using them. According to Dr. Sergey Sundukovskiy, Co-Founder, Chief Technology Officer and Chief Product Officer of Raken, Inc., “The estimated cost of weather-related delays in the United States alone approaches $4 billion.”13 Climate change is causing major economic concerns for the construction and building sector due to extreme weather events that result in severe flooding and drought, damaged buildings, and project disruptions. Risks include:
• Increases in insurance premiums due to property and land damage
• Rise in workers’ compensation claims from increases in heat or cold exposure, injuries sustained on the job due to weather related property damage, etc.
• Delays in project starts or completion due to worker shortages, unsafe conditions.
The costs of weather related losses to the real estate and construction segments is cause for concern. In the third quarter of 2021, natural disasters caused an estimated insurance loss of $48.5 billion14 and, in 2022, global economic losses of $313 billion.15
Infrastructure & Transportation: Physical infrastructure generally refers to structures or systems that facilitate economic activity. Economists generally agree that infrastructure is critical to economic wellbeing, enabling private businesses and individuals to produce and consume goods and services in a more efficient manner. For example, upgraded roads and bridges may greatly shorten travel distances for truck drivers, allowing them to deliver goods to consumers more quickly and at a lower cost.
For businesses, infrastructure can help lower fixed costs of production, especially transportation costs, which are often a central determinant of where businesses are located.16 Infrastructure tends to benefit the economy overall, as it allows more goods and services to be produced and transported with the same level of inputs, fostering long-term economic growth.17 Obviously, as extreme weather events increase in ferocity and frequency, infrastructure is at risk of damage. Heat waves, heavy precipitation, and other storms can cause additional delays and disruptions on roads, public transit systems, airports, and the like, adding to the costs of production and interfering with consumption.
Energy: The energy system is an important source of employment for Americans, providing jobs for about 7.8 million people.18 These jobs support power generation and transmission, fuel extraction and processing, and renewable energy and energy-efficiency installations and sales.
According to the U.S. Energy Information Administration, American energy exports also contribute to the economy. In 2020, U.S. energy exports exceeded total energy imports, as the United States was a net exporter of petroleum products, natural gas, and coal.19 Crude oil was the only major fuel type for which the United States was a net importer.20
Energy disruptions from extreme weather damage to energy infrastructure have cost billions of dollars.21 The nation’s energy system is also aging, with many components not designed to withstand the extreme weather conditions projected for this century.22
Agriculture: Agriculture and its related industries account for 10 .5 percent of U .S. employment, 21.1 million jobs and is attributable to more than $1.1 trillion of the U.S. gross domestic product. These include not only on-farm jobs, but also jobs in food service and other related industries. Climate data also reflects the upside of the green economy. Limiting CO2 emissions now increases the potential to reduce overall losses by the end of the century.23 In a similar vein, the projected 1-4 percent annual GDP decline under a high emissions scenario would drop to 0.1-1.5 percent in a medium emissions scenario.24
Commercial Fishing: As sea levels rise, the fishing industry will be one of the most adversely affected.25
Salmon and trout, for instance, thrive in cold, free-flowing water. As waters continue to warm habitat loss for both could be as high as 17 percent by 2030 and 34 percent by 2060 if emissions of heat-trapping pollutants are not reduced.26 That would be a huge loss for these fisheries, which was valued at around 11.5 billion U.S. dollars in 2022. In 2023, the market is forecast to decline by 0.9 percent to 11.4 billion U.S. dollars.27
Ocean acidification also poses a problem for the fishing industry. Shellfish, like clams and oysters, find it much more difficult to grow in a more acidic environment.
Other industries that are particularly economically vulnerable to the effects of climate change include tourism, insurance, healthcare and of course, Wall Street.
The differences in damages across sectors, locations, and income levels help to highlight that the effects of climate change are not the same for everyone. The effects of climate change are likely to be distributional, meaning that where some sectors see losses because of climate change, others may see gains.
Climate Change – Impact on U.S.
Workers When considering which sectors of employees are most negatively affected by climate change, it is often workers who perform their occupations outside that come to mind. While those employees are certainly vulnerable to the changing climate, there are a number of work populations that are adversely impacted by the effects of climate variations. Examples include emergency responders, health care workers, fire fighters, utility workers, farmers, manufacturing workers and transportation workers.
Climate conditions can exacerbate existing health and safety issues and lead to new unanticipated hazards. Workers may also be exposed to weather and climate conditions that the general public can elect to avoid. For worker populations such as migrant workers and day laborers who may have inadequate housing or other social and economic constraints, the adverse health effects of exposure to climate-related hazards in the workplace could be worsened by exposure to similar hazards in the home.28 Consider recent photos of farm laborers who continued harvesting grapes even as the California sky turned orange from distant fires growing ever closer.
A June 2022 New York Times article highlighted that 60 million people across the United States were under excessive heat warnings or heat advisories, with the National Weather Service issuing nearly three times as many advisories as the year prior.29
According to the NOAA, examples of climate related occupational hazards include high temperatures, air pollution, extreme weather and natural disasters, and biological hazards:30
• Occupational Exposure to Heat and Hot Environments
Workers who are exposed to extreme heat, prolonged work in hot environments or engaged in strenuous physical activity may be at risk for heat stress. Heat stress can lead to heat stroke, heat exhaustion, rhabdomyolysis (muscle tissue breakdown), and death. Occupational exposure to heat has also been associated with increased risk of traumatic injury.
• Air Pollution
Air pollution has been linked with both acute and chronic health effects such as heart disease, respiratory diseases, and allergic disorders. Air pollutants that are known to affect respiratory health include ground level ozone and particle pollution. Numerous factors including worksite location and weather conditions may affect occupational exposure to air pollution.
• Extreme Weather
Extreme weather events or natural disasters such as floods, landslides, storms, lightning, droughts, and wildfires are associated with occupational deaths, injuries, diseases, and mental stress. Workers involved in rescue, cleanup and restoration are exposed to hazardous conditions both during and after extreme weather events.
• Biological Hazards
Climate conditions such as temperature and rainfall affect the prevalence and distribution of vectors, pathogens, hosts and allergens. Associated health impacts include food-borne and water-borne diseases; asthma and allergies triggered by pollen; mold-related asthma; skin and lung irritation from poisonous plants; and vector-borne disease such as Lyme disease, dengue, chikungunya and Zika virus disease. The most vulnerable occupational groups may include outdoor workers, emergency responders, post-disaster remediation and construction workers, and health care workers. In addition to the direct health impacts associated with biological hazards, exposure to pesticides has been associated with a variety of adverse occupational health outcomes.
• Indoor Climate
High temperatures increase the need for climate-controlled buildings. Building-related illnesses (e.g., tight building syndrome or sick building syndrome), sometimes related to indoor air quality, may occur, especially in buildings with air conditioning, water damage, or energy-efficient “tight” buildings with microbial-contaminated humidifiers or air handlers that use biocides. Tight buildings may also lead to radon buildup in work areas such as smaller rooms, storage areas, or offices.
The Green Side
It’s not all bad news. To combat the concerns about the changing environment there has been a boom in energy efficient and climate conscious practices and an acceleration toward renewable energy.
According to the International Monetary Fund, “the US administration has committed to ambitious climate goals and is casting the transition to net-zero emissions as an opportunity to create new and high-paid “green” jobs.”31 In fact, the U.S. is picking up the pace to reach these goals and launching new “just transition” initiatives at an unprecedented pace, creating policies and programs to help workers impacted by the clean energy transition. Several U.S. state leaders are included among those that have recently undertaken “just transition” initiatives, including Colorado and New Mexico.32
More than 3 million of the 7.8 million jobs in the US energy sector are in areas aligned to America’s goal of being carbon neutral by 2050.33 This means renewable energy jobs in 2021 accounted for around 40% of total energy jobs. Worldwide employment in the sector grew by 700,000 from 2020-2021, reaching 12.7 million jobs, according to the International Renewable Energy Agency (IRENA).34
The greatest challenge for some workers in the fossil fuels sector will be making the transition to new livelihoods which may include up-skilling, changing location, and experiencing a pay cut. An article by the Brookings Institute states that the United States itself needs to find ways to support 1.7 million people who work in the fossil fuel sector.35 This includes all oil, gas, and coal operations, as well as workers in connected industries such as pipeline workers. That said, research suggests that employers and workers are flexible in these scenarios, skills are often transferable and challenges from transitions from fossil fuel industries to greener pastures are surmountable.36
Underwriting Considerations
By all counts, climate change is happening, and fast. From the energy sector to the agricultural segment and marine and fishing industries, change is upon us. The conventional landscapes for these industries are quite literally transforming in real time, forcing employers to reevaluate how, when and the feasibility of whether work is accomplished. Yet, it’s not all bad news, especially, if global awareness of the climate crisis increases and government resolution agreements are reached and executed.
New markets are emerging and existing green energy and technology businesses will continue to gain traction. Underwriters should look for industry experts on corporate responsibility within larger corporations. New technological advances will continue, creating more jobs within green sectors that will likely be white collar and well paid.
Underwriters should consider how weather events might impact industries and be aware of the increased frequency of severe storms, flooding, longer droughts, or uncontrolled wild fires. The framework of many industries relies heavily on transportation for trading, importing and exporting. While not your typical industries for Group Benefits, sectors that include farming and fishing are particularly vulnerable to weather and imperative to the health and well-being of local economies, and ultimately human life.
The effects of climate change are far-reaching. It wouldn’t be surprising to even see claims incidence tick up due to the stress of the potential climate threat or even an increase in injuries sustained due to weather events. While climate change is a global issue, the economic impact it will have on different states across the country and the trickle-down effects are important for understanding how best to prepare for the effects of climate change.
Actuaries and underwriters should consider how climate change and related heat maps could influence base rates or area factors. Based on county-specific data from the Climate Impact Lab, (a unique collaboration of 30 climate scientists, economists, computational experts, researchers, analysts, and students from some of the nation’s leading research institutions), economic losses due to climate change are concentrated around southern states where a deficit in agricultural yield is expected and in segments with high-risk labor that may likely experience an increase in mortality rates.37
Conclusion
It’s clear that climate change and its ripple effects will continue to be a defining challenge of the 21st-century economy. Whether it’s heatwaves, wildfire smoke, or attempts to adapt that create new hazards, the climate crisis is exacerbating risks for America’s workers. From home health aides and schoolteachers to construction and farm workers, people across the country are now facing compounding challenges on the widening frontlines of the climate crisis.
While it is difficult to know exactly how dramatic the effects of climate change will be, regions across the country are already experiencing serious economic consequences. Climate-related disasters like droughts, hurricanes and wildfires are impacting bottom lines from Main Street to Wall Street.
Importantly, the effects of climate change are unfair, often unpredictable and distributed unevenly across segments. Further, the renewable energy sector is helping to balance the negative economic impacts of extreme weather events. That said, the challenges associated with climate crises are steep and far-reaching. American businesses are quickly learning that in a world that is becoming smaller, supply chain disruption due to climate hazards in one place can cause potentially unforeseeable consequences elsewhere.
1 “Assessing the Global Climate in January 2023.” National Centers for Environmental Information (NCEI), 15 Feb. 2023, www.ncei.noaa.gov/news/global-climate-202301#:~:text=Globally%2C%20January%202023%20was%20the,10%2Dwarmest%20years%20on%20record.
2 Ibid.
3 NOAA National Centers for Environmental Information, “Climate at a Glance Global Time Series”.
4 Tierney, J.E., Zhu, J., King, J. et al. Glacial cooling and climate sensitivity revisited. Nature 584, 569–573 (2020). https://doi. org/10.1038/s41586-020-2617-x
5 “Climate Change Indicators: Heat Waves | US EPA.” US EPA, 1 Aug. 2022, www.epa.gov/climate-indicators/climate-change-indicators-heat-waves.
6 NOAA National Centers for Environmental Information, “Climate at a Glance Global Time Series”.
7 “How Climate Change May Affect the U.S. Economy.” Congressional Research Service, Apr. 2022, crsreports.congress.gov/product/pdf/R/R47063. Accessed 18 Mar. 2023.
8 Ibid.
9 Ibid.
10 Households; Owner-Occupied Real Estate Including Vacant Land and Mobile Homes at Market Value, Market Value Levels. 9 Mar. 2023, fred.stlouisfed.org/series/HOOREVLMHMV.
11 Ibid.
12 Olick, Diana. “Nearly One-third of U.S. Homes Are at High Risk of Natural Disaster, Study Says.” CNBC, 27 Jan. 2021, www.cnbc.com/2021/01/27/nearly-one-third-us-homes-natural-disaster-high-risk-new-study-says.html.
13 Elissa. How Climate Change Affects Construction Conditions. www.rakenapp.com/blog/how-could-climate-change-affect-construction-conditions#:~:text=Impact%20on%20construction%20projects&text=According%20to%20Dr.,damaged%20buildings%2C%20and%20project%20disruptions.
14 Wright, Alex. “Construction Insurance Pricing Reaches a Crossroad. Are Labor and Material Shortages and Climate Change to Blame?” Risk & Insurance, 4 Feb. 2022, riskandinsurance.com/construction-insurance-pricing-reaches-a-crossroads-are-labor-and-material-shortages-and-climate-change-to-blame.
15 Reuters. “Natural Disasters Caused $313 Bln Economic Loss in 2022 – Aon.” Reuters, 25 Jan. 2023, www.reuters.com/business/environment/natural-disasters-caused-313-bln-economic-loss-2022-aon-2023-01-25.
16 Traffic Congestion and Reliability: Trends and Advanced Strategies for Congestion Mitigation: Chapter 2. ops.fhwa.dot.gov/congestion_report/chapter2.htm.
17 “How Climate Change May Affect the U.S. Economy.” Congressional Research Service, Apr. 2022, crsreports.congress.gov/product/pdf/R/R47063. Accessed 18 Mar. 2023.
18 “Jobs in Renewable Energy Are Growing in the US – Here Are the Highlights.” World Economic Forum, 21 Nov. 2022, www.weforum.org/agenda/2022/07/renewable-energy-jobs-us.
19 U.S. Energy Information Administration (EIA). (2021). U.S. energy facts explained. Retrieved 3/2/2022
20 Ibid.
21 Zamuda, C., et al. (2018). Ch. 4: Energy supply, delivery, and demand. In: Impacts, risks, and adaptation in the United States: Fourth national climate assessment, volume II. U.S. Global Change Research Program, Washington, DC, p. 185.
22 Ibid.
23 United Nations Climate Change. “Climate Plans Remain Insufficient: More Ambitious Action Needed Now.” United Nations Climate Change, 26 Oct. 2022, unfccc.int/news/climate-plans-remain-insufficient-more-ambitious-action-needed-now. Accessed 17 Mar. 2023.
24 Ibid.
25 “60% of the World’s Fish Species at Risk of Extinction Due to Climate Change.” World Economic Forum, 28 Dec. 2022, www.weforum.org/agenda/2020/07/climate-change-threatens-60-percent-of-the-world-s-fish-species.
26 Ibid.
27 Statista. “U.S. Fishing Market Size 2013-2023.” Statista, 17 Mar. 2023, www.statista.com/statistics/1174479/fishing-industry-market-size-us/#:~:text=The%20fishing%20industry%20in%20the%20United%20States%20was,fishing%20market%20peaked%20in%202017%20at%2012.36%20billion.
28 Impact of Climate on Workers | NIOSH | CDC. www.cdc.gov/niosh/topics/climate/how.html.
29 Albeck-Ripka, Livia, and Derrick Bryson Taylor. “U.S. Sees A Wave of Heat-Related Warnings Ahead of Summer’s Start.” The New York Times, 16 June 2022, www.nytimes.com/2022/06/15/us/heat-wave-midwest-southeast.html.
30 Ibid.
31 “How The Green Transition Will Impact US Jobs.” IMF, 12 Dec. 2022, www.imf.org/en/News/Articles/2022/12/12/cf-how-the-green-transition-will-impact-us-jobs.
32 Aklin, Michaël, and Johannes Urpelainen. “Enable a Just Transition for American Fossil Fuel Workers Through Federal Action.” Brookings, 2 Aug. 2022, www.brookings.edu/research/enable-a-just-transition-for-american-fossil-fuel-workers-through-federal-action.
33 “Jobs in Renewable Energy Are Growing in the US – Here Are the Highlights.” World Economic Forum, 21 Nov. 2022, www.weforum.org/agenda/2022/07/renewable-energy-jobs-us.
34 Ibid.
35 —. “Enable a Just Transition for American Fossil Fuel Workers Through Federal Action.” Brookings, 2 Aug. 2022, www.brookings.edu/research/enable-a-just-transition-for-american-fossil-fuel-workers-through-federal-action.
36 Ibid.
37 Climate Impact Lab. “Estimating Economic Damage From Climate Change in the United States – Climate Impact Lab.” Climate Impact Lab, 9 Sept. 2022, impactlab.org/research/estimating-economic-damage-from-climate-change-in-the-united-states.
About Guy Carpenter / Smith Group
Smith LTD Management Group, Inc. is a disability and reinsurance consultant and a subsidiary of Guy Carpenter & Company, LLC, which is a global leader in providing risk and reinsurance intermediary services. Guy Carpenter is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital.
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