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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Overall labour productivity for the period 2000 to 2017 increased by an annual average of 3.9% (2.9% for 2000 to 2014). For the latest year the result is 2.8%. There was a gradual downward trend in labour productivity from 2000 to 2008, however, the post-crash period was characterised by strong increases in labour productivity, due to the layoffs of workers, particularly in sectors such as Construction, Real Estate and Distribution, Transport, Hotels and Restaurants. A short period of labour hoarding by employers in 2008 was followed by these large layoffs of employees in the wake of the collapse in the Construction sector in 2008. The extreme globalisation-related events of 2015 in the Irish economy result in a further spike in labour productivity in the period 2014 to 2017.

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As mentioned above, labour productivity showed a gradual downward trend in the period from 2000 to 2008. In overall terms, GVA growth and growth in hours and employment all rose at rates of close to 5%. The year 2008 shows evidence of labour hoarding, with GVA growth declining faster than hours worked, resulting in falling labour productivity. The substantial productivity improvement between 2009 and 2011 was due to hours worked falling at a faster pace than GVA.

Labour productivity growth is practically unchanged in 2012 due to negligible growth in GVA and labour hours. However, labour productivity declined in 2013 as labour growth outstripped that of GVA. GVA grew by 26% in 2015 because of major globalisation events causing a 21.7% increase in labour productivity, i.e.  change in total GVA per hour worked.  GVA growth exceeded labour growth between 2014 and 2017, which explains the increased labour productivity.

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The chart above shows labour productivity for the Domestic and Other sector of the economy. Labour productivity grew consistently between 2000 and 2004 because of GVA continually exceeding increases in labour hours worked. There was a significant fall in labour productivity growth between 2005 and 2008, explained largely by the developments in the Real Estate and Construction sectors. Productivity growth was negligible in 2008 because of hours and GVA both declining at a rate close to 2%. Labour hours worked fell from 2008 to 2012. The fall was particularly sharp in 2009 with a decline of over 10%. GVA growth declined in 2008 and 2009 and was positive in 2010 and 2011, resulting in positive labour productivity growth. GVA declined at a faster rate than labour hours in 2012, causing falls in productivity, while the fall in productivity in 2013 was a result of labour growth exceeding growth in GVA. Labour productivity growth was higher in the periods 2014 and 2015, due to higher GVA growth. However, labour productivity has fallen since 2015, due to falling levels of GVA resulting in growth of 0.6% in 2017 for the Domestic and Other sector.

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For the Foreign sector, labour productivity up to 2014 has followed a very different pattern compared to the Domestic and Other sector (see above). Productivity growth in the Foreign dominated sector has been significantly higher than the Domestic and Other sector, due to the high concentration of multinational enterprises (MNEs) operating in this sector. Labour productivity grew by 20% in 2002 and by just over 20% in 2010. In both cases this growth was caused by increases in GVA. The Foreign sector had a sharp decline in productivity growth in 2003, probably due to the end of the dot-com bubble, as many of the foreign MNEs were technology firms. In the Foreign sector, like the Domestic and Other sector, labour productivity growth was positive in 2009 and 2010, since hours worked were falling, while GVA was increasing.

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Extreme results are witnessed in 2015 in the Foreign sector due to globalisation related activity, with labour productivity rising to 75%. As a result, much of the data underlying the years prior to 2015 is difficult to observe. Growth in labour productivity in 2017 stood at 6.1%. This is primarily driven by the increase in GVA growth from 6.4% in 2016 to 10.4% in 2017.

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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.   

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Labour productivity growth has not been uniform across the sectors of the economy during the period 2000 to 2017. Manufacturing and Information and Communication have seen significant rises in labour productivity over this period, with the result that the Manufacturing sector has become 3.7 times more productive in 2017 than in 2000, while the Information and Communication sector is over three times more productive. In this period, labour productivity in Financial and Insurance activities has become twice as productive, while productivity in Public Administration and Defence decreased by 17% since 2000. Productivity in the Construction sector increased by 23 % over the entire period. In overall terms, GVA per hour worked for the whole economy has grown by 87% between 2000 and 2017.

A large proportion of the growth in labour productivity associated with the Manufacturing sector occurred between 2014 and 2017, driven by the globalisation events in 2015. Information and Communication was the second largest growing sector, with labour productivity increasing by a factor of 3 between 2000 and 2017. Labour productivity in the Construction sector increased by less than the overall economy, while Public Administration and Defence decreased over the period.

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Manufacturing made the largest contribution to overall labour productivity growth over the period up to 2014. This was followed by Information and Communication and by Financial and Insurance activities. Positive contributions also came from sectors such as Professional, scientific, Admin and support services, Human Health and social work, as well as Electricity, Gas and Steam. Real estate, Wholesale and Retail and Public Admin and Defence made a slightly negative contribution to growth in the period up to 2014.

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The chart above shows average annual contributions to total labour productivity (GVA per hour) growth in the whole economy, using the standard twenty-one sector presentation of the economy. Manufacturing has made the largest average contribution to total productivity growth, followed by Information and Communications and Professional, Scientific and Technical activities, although it should be noted the large additions from GVA to Manufacturing in 2015. The only negative contributions to total productivity growth over the period came from the Real estate sector, Public Admin and Defence as well as Wholesale and Retail, while the Construction sector, the Agriculture sector and the Education sector contributed very little over the entire period to 2017.

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The chart above shows labour productivity for the Market sector. The Market sectors includes all NACE categories, excluding Real Estate, Public Admin and Defence, Education, Health and Social Work. Labour productivity in the Market sector has been consistently positive in the period to 2017, except in the years 2012 and 2013, when labour productivity stood at -1% and -2% respectively. Two large peaks are evident from the chart where labour productivity stood at over 10%. This was in 2010 and 2015, the latter relating to the globalisation events of 2015. The spike in 2010 may be explained by the large redundancies that occurred in various sectors during the recessionary period, which led to the remaining workers increasing their productivity. The Market sector recorded labour productivity growth of 4.2% in 2017, mainly driven by the increased level of GVA in 2017.