Productivity in Ireland 2017

Source publication:  National Income and Expenditure 2017 Tables 1-22 and Annex 1 for 1995-2017 (XLS 393KB)

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The figure above shows Labour Productivity analysed by MFP and capital deepening. Capital deepening is growth in the capital intensity of labour (the amount of capital available per hour worked).

 Irish labour productivity has been characterised by strong growth for most of the period, explained by the trend in capital deepening and MFP. The declines in labour productivity in 2003,2005, 2008 and 2012 have also been associated with increased capital deepening, although they have been offset by falls in multi-factor productivity.

Ireland’s growth in labour productivity from 2000 to 2005 was the result of the positive trend in capital deepening and offsetting falls in MFP. The period 2006 to 2014 shows positive capital deepening over the entire period, while MFP was more erratic with both positive and negative results. In 2015, Labour productivity increased substantially, driven mainly by the increased capital deepening. In 2017, Labour productivity recorded growth of 2.8%, with MFP making a positive contribution of about 6%.

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Labour productivity growth in the Domestic and Other sector was characterised by increases in capital deepening in the period up to 2008. Labour productivity growth remained positive for the period up to 2004 in line with the economic performance associated with the Celtic Tiger. This was followed by a decline in 2005 associated with a fall in MFP. Since 2008, labour productivity growth has followed an increasing path until 2011, mainly due to increased capital deepening and increased MFP, particularly in 2011. However, 2012 saw a substantial fall in labour productivity, which was associated with a fall in MFP. Since 2013, in line with improvements in economic growth, labour productivity growth has remained positive, with MFP the main driving force behind the increase in 2015, i.e. improvements in how inputs are used to produce GVA. In 2016 and 2017, labour productivity growth declined, driven by the falling levels of MFP and Capital Deepening.

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In line with the Domestic and Other sector, most of the increases in labour productivity in the Foreign sector have come from capital deepening. Prior to 2008, labour productivity growth was characterised mainly by capital deepening. In 2008, with the onset of the recession, labour productivity fell, due mainly to a fall in MFP as workers were laid off and production fell in the economy. In comparison to the Domestic and Other sector, labour productivity growth increased up until 2011, driven by increasing contributions from MFP and capital deepening. Labour productivity declined in 2012 and declined further in 2013, due to a fall in MFP.  In 2014, labour productivity increased, due to increased capital deepening.

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The chart above shows a breakdown of labour productivity with the years 2015, 2016 and 2017 included. In 2015, there was a 75% increase in labour productivity due to a 143% increase in capital intensity of labour and an 65% fall in multi-factor productivity. These results were due to significant increases in multinational activity in the Irish economy with large additions to GVA taking place in the form of contract manufacturing and aircraft leasing. The year 2016 and 2017 saw increases in labour productivity of 1.4% and 6.1%, which reflected results in line with the series prior to 2015.

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The figure above displays annual average labour productivity growth over the period, with the Manufacturing sector and Professional, Scientific and Support services sector showing the fastest growth. Information and Communication has also shown strong growth in labour productivity. These industries have accounted for a substantial share of aggregate capital deepening during the period. The Electricity, Gas and Steam sector also performed well over the entire period, as did the Financial and Insurance sector. Public Admin and Defence experienced negative labour productivity growth over the period.