Labor market impacts of destructive California wildfires

California has a long history of wildfires. In each decade between 1960 and 1990, wildfires destroyed fewer than 1,000 structures. In the 1990s, that number rose to over 6,000 and then increased further to over 10,000 in the first decade of the new millennium. In the 2010s, that figure jumped to over 50,000, with the Tubbs Fire in 2017 destroying over 5,600 structures and the Camp Fire in 2018 destroying nearly 19,000 structures. Rising temperatures, drier weather conditions, and increased construction of housing and infrastructure in the expanding wildland-urban interface are contributing to the increased wildfire prevalence and severity. California wildfires have received much attention, in part, not only because of the severity of the events but also because of the adverse air quality from wildfire smoke that affects populations far from the fires themselves, causing potential health issues, financial impacts, and water-quality challenges.

Much of the literature surrounding labor market impacts of natural disasters has focused on events such as tsunamis, earthquakes, hurricanes, and tornadoes. Many studies have found that wages increased and employment fell postevent, depending on the severity of a natural disaster. Employment and wage changes may be due to combinations of rebuilding activity, outmigration, and sector-level effects. Although some studies have focused on the effects of large wildfires on labor market outcomes, not one has studied the employment impacts of different-sized wildfires by industry sectors in California.

In this article, the analysis uses the panel data structure of multiple wildfire events across time in multiple counties in California and uses a generalized difference-in-difference (GDD) modeling approach with an event-study specification (impacts of an event over time) for measuring the effects of destructive wildfires on labor markets over time. Differences across each of the 10 major industry sectors are also discussed.