Productivity in Ireland 2019 presents the latest analysis by CSO of productivity developments in the Irish Economy since 2000. This report presents a wide variety of indicators from basic Labour Productivity to the experimental but comprehensive KLEMS and QALI related outputs. These results also include international comparisons with our partners in the European Union and beyond.
In this report we have also included additional analysis on innovation in Ireland looking at expenditure on Research and Development (R&D) which presents trends in innovation expenditure in Foreign-owned firms and Domestically-owned firms in Ireland. In this case we have used existing data compiled by our colleagues in CSO’s Business Statistics Directorate to give an improved context for the results on productivity presented in this report.
The measurement and analysis of productivity in Ireland is a challenging undertaking due to the scale and concentration of globalisation activities in the economy. The entire range of indicators presented such as Labour Productivity, Capital Services, Labour Share, MFP etc. are all significantly impacted by globalisation-related developments in the economy, particularly since 2015. Over this period, we have seen a continuous stream of imports of Intellectual Property Products (IPP) that have added to the capital balance sheet of Ireland with significant impacts on all productivity indicators. For example, increased Capital Services, reduced Labour Share and increased GVA are all explained by these globalisation-related developments. To assist readers, this publication presents the economy as a two-sector Foreign and Domestic model, where the highly globalised economic sectors are presented separately from the remaining sectors of the economy. The results for the Domestic sector are particularly informative for policy makers and other analysts and present indicators that can be compared with productivity results for other countries that are not similarly impacted by globalisation. The standard twenty-one sector analysis is also provided where individual sectors in the economy can be separately assessed.
In addition to including results for 2019 and extending the time series, work on consolidating the analysis presented in previous reports on KLEMS and QALI has continued. The benefit of QALI analysis, where labour market data is supplemented by education, experience and gender information, is that it gives insight into human capital developments in the economy. In other words, as the QALI indicator increases, the stock of human capital in the economy is also improving. Improved data sources and reassessment of the methodologies used has led to improved QALI estimates in this report. In the case of KLEMS, the impact of intermediate inputs of Energy, Materials and Services on production is included in the productivity analysis along with the standard inputs of capital and labour. The cross-cutting productivity analysis necessary to produce QALI and KLEMS estimates - where Economic, Labour Market and Business data are combined - can occasionally deliver unexpected results. For this reason, the QALI and KLEMS estimates are still considered experimental and remain a work in progress.
Key Findings for the Period 2000 to 2019:
1 - Overall Labour Productivity for the period 2000 to 2019 increased by an average of 3.2% per annum. For 2019, the result is an increase of 3.1%.
2 - Multi-factor Productivity in 2019 declined by 1.4%. For the entire period (2000 to 2019) a result of -0.7% is reported.
3 - Agriculture and Information and Communications showed the largest growth in Labour Productivity in 2019 at 30.4% and 12.4% respectively.
4 - Ireland has a relatively low Labour share and is consistently below the EU 27 average. Recent results are impacted by the high level of IPP additions to Ireland’s capital stock despite an overall steady growth in COE. The Labour share reached a series low of 33% in 2019.
5 - Ireland’s capital stock per employee has increased from €164,000 per employee to €445,000 per employee between 2000 and 2019, an increase of 171%.
Foreign v Domestic and Other Sector Breakdown in the Irish Economy - Key Results for 2010 - 2019
1 - In the Domestic and Other sector, Labour Productivity growth in 2019 was 1.8%, an improvement on the result for 2018 of 1%.
2 - Average Annual growth in Capital Stock for the Domestic and Other sector was 3.3% for 2010 - 2019. Average growth in the same period for the Foreign sector was an extraordinary 26.6%.
3 - In 2019, Multi-factor Productivity was -5.8% for the Foreign sector and 0.6% for Domestic and Other sector. Average MFP growth in the Foreign sector was -8.7% over the period 2010-2019, while MFP in Domestic and Other sector was relatively unchanged for the same period.
International Comparisons - Key Results for Period 2010 - 2019:
1 - The Domestic and Other sector experienced an increase in Labour Productivity of 0.8% which is comparable with the EU and Euro Area averages for this period. The Foreign sector in the Irish economy had average Labour Productivity growth of 8.8%, a clear indicator of the impact of globalisation events on labour productivity in Ireland over the period.
2 - Ireland - Foreign and Ireland - Total had the greatest falls in Unit Labour Costs (ULC) over the period compared to a large selection of EU countries, with results of -4.5% and -2.3% respectively. These results, which indicate improved competitiveness, are driven by globalisation events in the Irish economy. However, for the Domestic and Other sector, no change was observed in ULC growth similar to results across other EU member states during this period.
3 - With results of 7.6%, Ireland had the largest average growth in Capital Stocks for the period 2010 to 2019, where comparable data are available for other countries. For the Domestic and Other sector, the equivalent growth rate was 3.3% and for the Foreign sector the result was an extraordinary increase of 26.6%. The rate of increase in Capital Stocks for Ireland – Total and for Ireland - Foreign was higher than all countries for which data are available. Once again, the comparisons are more meaningful when the Domestic and Other sector for Ireland is examined relative to other EU countries as the impact of globalisation can vary across countries.
4 - Regarding levels of innovation in the Irish economy, R&D intensity for Ireland in 2017[1] was 0.9%, which was below the EU 28 average of 1.4%. Using GNI* instead of GDP as a denominator would increase the R&D intensity ratio to 1.5% in 2017 and may better reflect the Irish position.
[1] 2017 is the most recent year for available data
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