Productivity in Ireland 2017

This second annual publication by the CSO aims to further develop understanding and inform the discussion around productivity in the globally-integrated Irish economy. The publication develops further the Gross Value Added (GVA) approach followed in the previous publication with an additional research chapter covering initial estimates for KLEMS or Gross Output based productivity and a quality adjusted (QALI) estimate for labour input covering several key economic sectors in the Irish economy.  

For the Gross Value Added (GDP based) approach, estimates of labour productivity, capital services and multi factor productivity are all detailed for an extended twenty- one economic sector model of the Irish economy. 

Increases in productivity growth are generally associated with improvement in living standards.  However, in the case of the Irish economy a note of caution must be sounded; because of the high concentration of foreign owned Multinational Corporations, there are instances of very high productivity growth that result in a limited spill-over into the Domestic and Other sector of the economy. Therefore, where it is meaningful and technically feasible the productivity measures for the economy have been reported separately for the Foreign Sector which is dominated by Multinational Corporations and the remaining Domestic and Other Sector, as presented in the CSO national accounts publication Gross Value Added for Foreign-owned Multinational Enterprises and other Sectors.

An analysis of productivity in the market sector has also been produced in this publication.

Key findings for the period 2000 to 2017:

1-Labour productivity grew at an average annual rate of 3.9 percent over this seventeen- year period. However, when the impact of 2015 is excluded labour productivity grew by 2.9 percent.

2 - Multi-factor productivity for the entire period decreased marginally by 0.1 percent. However, when the impact of 2015 is excluded, the result is an increase of 0.7 percent which compares favourably with other EU countries.

3- The industry sector showed the fastest growth in average annual labour productivity growth over the period 2000 to 2017.

4- Ireland’s capital stock per employee has increased from €152,000 per employee to €381,000 per employee between 2000 and 2017, an increase of 150 percent. 

Foreign v Domestic and Other sector breakdown in the Irish economy-Key results

1- In the Domestic and Other sector average annual labour productivity grew at around 2.3 percent when the impact of 2015 is excluded, for the entire period the result is 2.2 percent . However, for the Foreign sector the average annual growth rate was 5.4 percent excluding the impact of 2015 and almost 9.3 percent for the entire period.

2- Capital stock per worker for the Foreign sector increased by an average annual growth rate of 5.8 percent when the impact of 2015 is excluded.  For the entire period the growth rate increases substantially to 30 percent. For the Domestic and Other sector, the growth in capital stock per worker is around 3 percent for both the period comparisons

3- For Multifactor productivity in the Domestic and Other sectors the average annual growth is 0.5 percent for the period to 2017 and 0.3 percent when the impact of 2015 is excluded. Foreign sector MFP shows major changes between the two periods with an average annual result of -2.2 percent to 2017 and +1.52 percent when the impact of 2015 is excluded. This is explained by the substantial negative MFP result for 2015.

International Comparisons- Key results:

1- Annual average Labour Productivity for the entire period for Ireland as a whole was 3.9% which compares with the EU 28 average of 1.25% and the EuroArea average of 1%.  The highest reported result is for the Ireland - Foreign Sector of 9.3% followed by Romania at 5.4%.  The Ireland -  Domestic and Other Sector growth rate in labour productivity is 2.3% reflecting the importance of looking beyond the National rate.  The lowest rate reported is for Luxembourg at 0.2% for the period.  

2- Despite having had one of the highest levels of growth in nominal ULC from 2000 to 2008, Ireland has had the largest cumulative fall in nominal unit labour cost over the entire period 2000 to 2017 for the economy as a whole and also for both the Foreign Sector and the Domestic and Other Sector.

3- For Multifactor productivity in a European context the Irish economy had cumulative growth of 1.91% over the entire period behind the Czech Republic, Finland, Germany, the UK and Austria, among others. The Foreign sector in the Irish economy shows a strong performance relative to the other EU countries shown. The Foreign sector posted cumulative growth of 5.22% in the period up to 2014, the highest result observed. The Domestic and Other sector of the economy recorded a cumulative growth rate of 0.84% in the period to 2014, resulting in a position of 8^th in the European partner countries where data was available. Denmark, Italy and France recorded negative MFP annual average growth rates in the period to 2014.

 4- The EU average annual growth in capital stocks per worker from 2000 to 2017 was approximately 0.6 percent. For the Irish Domestic and Other sector, the equivalent growth rate was 3 percent and for the Foreign sector was 30 percent.  The rate of increase in capital stocks in Ireland for both the Foreign sector and the Domestic and Other sector was higher than for any country in the EU for which data are available.

The results for productivity in this publication are based on Gross Value-Added growth trends.  In this release considerable detail has been added in terms of almost doubling the number of economic sectors presented.  In addition, presentations of the Market Sector that exclude the Public Sector and the assets and rents both actual and imputed of the Real Estate Sector are included.   

The Research Chapter presents experimental estimates on a KLEMS or Gross Output basis which is a more developed model for productivity measurement.  The Chapter also includes initial QALI estimates that are not formally included in the main chapters of the publication.  Ultimately the results in the CSO Statbank tables will enable many alternative presentations of productivity.  More generally we look forward to a meaningful engagement with our stakeholders once these results have been fully considered to set priorities for future productivity analysis.