As wildfires become a more significant risk around the world, it’s important to consider the ways that fires and fire season affect the economy. An economic study has estimated that each additional day of smoke exposure from a wildfire reduces earnings in a community by about 0.04% over two years.3 Below, we’ll take a closer look at some of the many effects of wildfires on both local and national economies.
Health Impacts
Health and loss of life are significant personal impacts of wildfires that also affect economies. Fires across the U.S. in 2019 caused about 3,700 civilian deaths and another recorded 16,600 injuries.4 In addition to the major personal trauma of these deaths and injuries, they also have the potential to bring about change in local economies. Victims may be unable to work either permanently or for a period of time during recuperation.
Another health impact of wildfires related to the economy is air pollution. Individuals in close proximity to a wildfire face dangers from breathing smoke, and major wildfires can even negatively affect the air quality thousands of miles away.5 Even individuals not directly harmed in a fire may have health repercussions that affect their livelihood and healthcare needs.
Property Loss
Property loss and damage is one of the primary effects of wildfires. A fire occurs in a structure every 64 seconds across the U.S., although outdoor fires remain more common. In total, fires in the U.S. in 2020 caused $21.9 billion in property damage.6 The largest wildfires may cause well over $1 billion in property loss and damage individually—the costliest wildfire in U.S. history, 2018’s Camp Fire, resulted in a loss of about $10 billion at the time. Eight of the 10 costliest wildfires ever in the U.S. have taken place in the past four years.78
Property loss is an immediate economic impact of wildfires, but there are also ripple effects that carry on for years. With the loss of property comes the displacement of individuals and families from their homes, the decimation of businesses, and significant effects for insurers. Perhaps surprisingly, local employment and wages may actually increase during large wildfires as fire suppression efforts generate employment opportunities. However, wildfires tend to make local labor markets less stable over time because they cause dramatic disparities in seasonal employment.9
Tourism and Recreation
The U.S. outdoor recreation economy was nearly $374 billion in 2020, roughly 1.8% of the national GDP.10 Wildfires not only have the potential to wipe out outdoor areas that draw in tourists but also to drive people away for years to come. Tourists and outdoors enthusiasts tend to avoid state and national parks when smoke is present, and this can have a widespread impact on other industries as well. In this way, wildfires can also negatively affect hospitality, restaurant, and other industries.
The Bottom Line
Wildfires damage local and national economies in a multitude of ways, some of which are more direct and obvious than others. Given that the ripple effect of wildfire damage extends across a very large geographic area and across many industries, it can be difficult to calculate the full extent of the costs of these disasters. A recent study by University College London estimated that 2018 wildfires from California alone cost the U.S. economy a total of $148.5 billion, with about one-third of those losses from outside of the state. This demonstrates just how far the reach of wildfire damage is, and with fires growing more intense in recent years, these numbers may rise.11