Productivity in Ireland 2018

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The chart above shows growth in hours worked and the quality adjusted labour input, known as QALI. It is clear from the graph above that both hours worked and QALI followed a similar pattern up until 2008. From 2008 to 2011, clear differences emerge between the two measures. In the depths of the recession from 2009 to 2011 for the Construction sector, the fall in QALI was much greater than the fall in hours worked. The QALI measure fell more sharply as this accounts for the education levels of those working in the sector, while hours worked does not. The gap between the two measures indicates that the majority of those who left the sector during the period were those who were in aggregate more educated including engineers and architects or were more experienced when compared to total workforce in the sector.  This could reflect both the labour composition of companies that went into liquidation but also cost cutting measures in the remaining firms where those with the highest salaries went first. By 2012 and 2013, the gap between growth in hours and QALI narrowed, reflecting the impact of the relative education and experience of the additional workers being hired on overall labour composition in the sector. By 2016, growth in hours worked rose above QALI, perhaps leading to the conclusion that as the economy recovers, the sector is hiring people with a lower level of education. For the latest 2 years, 2017 and 2018, QALI and hours worked grew at the same rate, suggesting that the labour composition of the sector is now more stable in terms of professional and lower skilled workers.

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The chart above shows QALI decomposed into Labour composition, otherwise known as labour quality, and hours worked for the Construction sector. The early years were characterised by QALI and hours worked growing at a similar rate, however it is during the recessionary period that labour quality begins to make an impact. Labour quality decreased by 2% in 2009 and 2010, when the worst of the recession hit. As discussed above, the higher educated were hit the hardest. This could be due to governments and MNEs cutting spending on designing new offices, factories and industrial units, while lower skilled workers were still employed in finishing pre-planned projects.   This collapse in the construction sector led to a fall in demand for engineers and architects resulting in job losses. In recent years, the labour composition has remained low, however this could be due to increases in lower skilled labourers joining. As construction activity picks up demand for labourers and manual workers has increased, perhaps because the focus is now turning to building more social and affordable housing.

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The chart above compares growth in hours worked and QALI in the Wholesale and Retail sector. It is clear once again from the graph above that both hours worked and QALI followed a similar pattern over the period. Between 2008 and 2010, a slight gap emerges between the two measures, however it is not as pronounced as in the Construction sector. At the height of the recession in 2009, the fall in QALI was slightly greater than the fall in hours worked, suggesting that a small number of higher educated people left the sector. In 2018, the fall in hours was greater than the fall in QALI, suggesting that it was lower educated workers left the sector at a greater rate.

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The chart above shows QALI analysed by Labour composition and hours worked in the Wholesale and Retail sector. The early years were characterised by QALI and hours worked growing at a similar rate, however, in line with the Construction sector above, it is during the recessionary period that the impact on labour quality begins to be more apparent. As discussed above, labour quality decreased in 2009, as many higher educated and higher paid workers left the sector, however a slight balancing out occurred between 2010 and 2012 with a small increase in the labour composition. This was an indication that some lower paid workers also lost jobs during the period. In contrast by 2018, as mentioned above, labour quality increased by 1%. However, no growth in hours occurred indicating that the growth in 2018 was attributed entirely to higher educated workers joining the workforce, rather than those already working in the sector increasing the hours they worked.

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The chart above shows the growth in the QALI and hours worked in the Professional and Scientific activities. Like the sectors above, both measures follow a similar pattern over the period. However, during the years between 2008 and 2010 a small gap emerges between the two measures, with employment of professional and more experienced workers falling quicker that the general trend for all workers in this sector. A gap of 3% emerges between the two measures in 2009. This sector which comprises both foreign and domestic activities typically employs many professional and scientific workers. These higher paid or more experienced employees were first to go during the crisis period resulting in composition effects evident from the chart below.

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The chart above provides additional information on the Professional and Scientific sector and gives more information of the labour composition. As mentioned above, the labour composition decreased by 4% in 2009, suggesting that higher paid professionals had been laid off and possibly replaced by service providers delivering these services rather than employees. In the recent years, the labour composition has seen growth of about 1% with many higher educated professionals joining the workforce. This increase of higher educated workers joining in recent years may be a sign of the increased uptake of professionals working in the expanding Aircraft Leasing activities and also additions to the legal, accounting and scientific partnerships and companies servicing a growing economy.

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The chart above shows the situation in terms of growth in quality adjusted labour input and hours worked on an economy wide scale. During the early years between 2005 and 2007 when the economy was booming, and opportunities were abundant, the growth in QALI outstripped growth in hours. This growth may be due to the increased availability of grants and people accessing third level that led to an increase in growth of higher educated workers joining the workforce. As the economy collapsed in 2009 and 2010, it was employees with lower and higher levels of education, who experienced unemployment.  This was due to the recessionary effects on the economy with house building and overseas investment stalling, falling demand for business and personal services and lower levels of discretionary spending. Since the recession, growth has recovered and in 2018 hours worked grew faster than the growth in QALI.  

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The final graph shows QALI decomposed into Labour composition and hours worked for the total economy. The period of 2009 - 2010 is characterised by an improvement in composition while large numbers of employees became unemployed. The composition of workers becoming unemployed was lower in terms of education and experience compared to the remaining workforce and labour quality is positive. The latter years are characterised by further positive contributions from labour composition. However, this is more likely to be indicative of higher skilled workers joining the workforce.