This release was compiled during the COVID-19 crisis. The results contained in this release reflect some of the economic impacts of the COVID-19 situation.The full series of information notes on the implications of COVID-19 on the National Accounts can be found on our Information Notes page.
Changes in labour productivity reflect changes in the overall efficiency of the labour force. Labour productivity growth is most easily explained as the difference between Gross Value Added (GVA) growth and the growth in hours worked. Labour productivity growth can also be explained by changes in the level of capital in the economy (capital deepening), as well as changes in Multifactor Productivity (MFP).
| Timeperiod | Domestic Sector | Foreign Sector | Total Economy |
|---|---|---|---|
| 2011 | 1.1 | 2.2 | 3.3 |
| 2012 | -0.8 | -0.9 | -1.7 |
| 2013 | -1.1 | -1.4 | -2.5 |
| 2014 | 2.4 | 1.7 | 4.1 |
| 2015 | -4.1 | 22.4 | 18.3 |
| 2016 | -0.8 | -2.8 | -3.6 |
| 2017 | 0.6 | 1.9 | 2.5 |
| 2018 | 1.3 | 4.9 | 6.2 |
| 2019 | -0.3 | 2.6 | 2.3 |
| 2020 | 4.4 | 12.9 | 17.3 |
| 2021 | 1.3 | 4.2 | 5.5 |
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Ireland is often described as having a ‘two-speed’ economy, in which the growth in output for foreign-owned multinational enterprises (MNEs) far outpaces that of the domestic economy. Figure 4.1 shows the contribution of the Domestic and Foreign sides of the economy to total labour productivity growth over the period 2011- 2021, which highlights the dominant influence of the Foreign sector. In 2021, the Foreign sector explained 4.2% of the total economy labour productivity growth rate of 5.5%, with the Domestic sector contributing just 1.3%. There are two main reasons for the significant influence of the Foreign sector on total labour productivity growth. Firstly, the Foreign sector has historically been far more productive than the Domestic sector, with labour productivity of €370/hour compared to €56.1/hour for the Domestic sector in 2021. At the same time, labour productivity for the Foreign sector has increased far more rapidly, with average annual labour productivity growth of 7.6% per year compared to just 1.1% for the Domestic sector.
| Timeperiod | Labour Productivity | Gross Value Added | Hours Worked |
|---|---|---|---|
| 2011 | 3.3 | 1.5 | -1.8 |
| 2012 | -1.7 | -2.4 | -0.7 |
| 2013 | -2.5 | 1.3 | 3.8 |
| 2014 | 4.1 | 7.4 | 3.3 |
| 2015 | 18.3 | 21.4 | 3 |
| 2016 | -3.6 | 1.4 | 5 |
| 2017 | 2.5 | 6.6 | 4.1 |
| 2018 | 6.2 | 9.8 | 3.6 |
| 2019 | 2.3 | 5.2 | 2.9 |
| 2020 | 17.3 | 7.1 | -10.2 |
| 2021 | 5.5 | 11.9 | 6.4 |
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| Timeperiod | Labour Productivity | Gross Value Added | Hours Worked |
|---|---|---|---|
| 2011 | 3.7 | 1.9 | -1.8 |
| 2012 | -2 | -3 | -1 |
| 2013 | -1.7 | 2.2 | 3.9 |
| 2014 | 2.7 | 5.8 | 3.2 |
| 2015 | 2.9 | 5.7 | 2.7 |
| 2016 | -2.9 | 2 | 4.9 |
| 2017 | 1.3 | 4.4 | 3.1 |
| 2018 | 3 | 5.9 | 2.9 |
| 2019 | 1.3 | 4.1 | 2.9 |
| 2020 | 5.2 | -7 | -12.2 |
| 2021 | -1 | 4.6 | 5.7 |
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Figures 4.2 and 4.3 above compare labour productivity growth for the total economy and the Domestic sector from 2011 to 2021. The two graphs explain labour productivity growth by showing changes in GVA and hours worked, highlighting the differences between productivity growth for the sectors over the period. Labour productivity growth for the total economy is generally higher than that of the Domestic sector, due to the impact of foreign-owned MNEs on the total economy.
While labour productivity for the total economy grew by 5.5% in 2021, it declined by 1% for the Domestic sector. There were large increases in hours worked following the initial impact of the COVID-19 pandemic in 2020, with increases of 6.4% for the total economy and 5.7% for the Domestic sector. The rapid decreases in hours worked in the Domestic sector in 2020 led to a temporary ‘spike’ in labour productivity growth but the large-scale return of workers to employment led to a rebound effect in 2021. Negative labour productivity growth for the Domestic sector was recorded in 2021 as hours worked grew faster than GVA. However, looking to the total economy, GVA increased by 11.9% in 2021, with the increase driven by sectors such as Manufacturing - Foreign and ICT and this explained the positive labour productivity growth.
| Description | Subsector | Domestic Sector |
|---|---|---|
| Transportation & Storage (H) | 0.85 | 0 |
| Financial & Insurance Activities (K) | 0.6 | 0 |
| Real Estate Activities (L) | 0.59 | 0 |
| Manufacturing - Domestic | 0.42 | 0 |
| Arts, Entertainment & Recreation (R) | 0.24 | 0 |
| Agriculture, Forestry & Fishing (A) | 0.23 | 0 |
| Mining & Quarrying (B) | 0.04 | 0 |
| Water Supply, Sewerage & Waste Management (E) | -0.01 | 0 |
| Other Service Activities (S) | -0.05 | 0 |
| Activities of Households as Employers (T) | -0.09 | 0 |
| Professional, Scientific & Technical Activities (M) | -0.1 | 0 |
| Accommodation & Food Service Activities (I) | -0.12 | 0 |
| Construction (F) | -0.22 | 0 |
| Human Health & Social Work (Q) | -0.23 | 0 |
| Electricity, Gas & Steam (D) | -0.26 | 0 |
| Education (P) | -0.32 | 0 |
| Public Administration & Defence (O) | -0.33 | 0 |
| Wholesale & Retail (G) | -0.62 | 0 |
| Domestic Sector | 0 | -1.02 |
| Administrative & Support Service Activities (N) | -1.62 | 0 |
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Figure 4.4 shows the contribution of each sector to the 1% fall in Domestic labour productivity for 2021. Administrative & Support Service Activities (-1.6%) made the largest negative contribution. The largest positive contribution was from Transportation and Storage (0.9%), with Financial & Insurance Activities (0.6%) and Manufacturing - Domestic (0.4%) also making positive contributions.
| Description | Reallocation Effect | Productivity Effect | Contribution |
|---|---|---|---|
| Transportation & Storage (H) | 1.04 | -0.19 | 0.85 |
| Financial & Insurance Activities (K) | -0.83 | 1.43 | 0.6 |
| Real Estate Activities (L) | 1.02 | -0.44 | 0.59 |
| Manufacturing - Domestic | -0.77 | 1.19 | 0.42 |
| Arts, Entertainment & Recreation (R) | 0.29 | -0.06 | 0.24 |
| Agriculture, Forestry & Fishing (A) | 0.26 | -0.03 | 0.23 |
| Mining & Quarrying (B) | -0.06 | 0.11 | 0.04 |
| Water Supply, Sewerage & Waste Management (E) | -0.22 | 0.21 | -0.01 |
| Other Service Activities (S) | -0.01 | -0.04 | -0.05 |
| Activities of Households as Employers (T) | 0 | -0.09 | -0.09 |
| Professional, Scientific & Technical Activities (M) | -0.04 | -0.06 | -0.1 |
| Accommodation & Food Service Activities (I) | 0.34 | -0.46 | -0.12 |
| Construction (F) | 0.19 | -0.41 | -0.22 |
| Human Health & Social Work (Q) | 0.1 | -0.34 | -0.23 |
| Electricity, Gas & Steam (D) | 0.23 | -0.49 | -0.26 |
| Education (P) | 0.54 | -0.85 | -0.32 |
| Public Administration & Defence (O) | -0.48 | 0.16 | -0.33 |
| Wholesale & Retail (G) | -1.58 | 0.96 | -0.62 |
| Domestic Sector | -0.88 | -0.13 | -1.02 |
| Administrative & Support Service Activities (N) | -0.89 | -0.73 | -1.62 |
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Figure 4.5 shows the contributions of each sector to Domestic labour productivity growth, but further decomposes the contribution of each sector into a productivity effect and a reallocation effect. The reallocation effect can be described as the productivity impact when a sector becomes relatively smaller or larger compared to other sectors and the overall economy. For example, if a less productive sector becomes relatively smaller from one year to the next, this has the effect of increasing labour productivity for the Domestic sector. The productivity effect on the other hand can be explained by changes in labour productivity for the individual sectors.
The 1% decrease in labour productivity for the Domestic sector in 2021 was almost entirely driven by reallocation effects (-0.9%) rather than productivity effects (-0.1%). The negative reallocation effect can be explained by sectors such as Wholesale & Retail (-1.6%), Financial and Insurance (-0.8%) and Admin & Support (-0.9%). This was due to a return to growth in hours worked for these less productive sectors in 2021, coming off a low base in 2020. Some sectors saw large increases in labour productivity (positive productivity effects) such as Financial & Insurance (1.4%), Manufacturing – Domestic (1.2%) and Wholesale & Retail (1%), while most sectors contributed to the overall decline in labour productivity in 2021.
| Description | Reallocation Effect | Productivity Effect | Contribution |
|---|---|---|---|
| Domestic Sector | 0.39 | 0.75 | 1.14 |
| Professional, Scientific & Technical Activities (M) | 0.23 | 0.3 | 0.53 |
| Administrative & Support Service Activities (N) | 0.27 | 0.24 | 0.51 |
| Real Estate Activities (L) | 0.52 | -0.03 | 0.49 |
| Construction (F) | 0.31 | -0.05 | 0.26 |
| Wholesale & Retail (G) | -0.25 | 0.37 | 0.12 |
| Agriculture, Forestry & Fishing (A) | -0.01 | 0.1 | 0.1 |
| Manufacturing - Domestic | -0.38 | 0.44 | 0.05 |
| Public Administration & Defence (O) | 0.01 | 0.01 | 0.02 |
| Water Supply, Sewerage & Waste Management (E) | -0.03 | 0.04 | 0.01 |
| Activities of Households as Employers (T) | -0.01 | 0 | 0 |
| Other Service Activities (S) | -0.01 | -0.01 | -0.02 |
| Human Health & Social Work (Q) | 0.01 | -0.03 | -0.02 |
| Mining & Quarrying (B) | -0.05 | 0.02 | -0.03 |
| Electricity, Gas & Steam (D) | -0.03 | -0.01 | -0.04 |
| Arts, Entertainment & Recreation (R) | -0.11 | 0.06 | -0.05 |
| Accommodation & Food Service Activities (I) | -0.05 | -0.05 | -0.1 |
| Transportation & Storage (H) | -0.05 | -0.09 | -0.14 |
| Education (P) | -0.03 | -0.14 | -0.17 |
| Financial & Insurance Activities (K) | 0.05 | -0.43 | -0.38 |
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Figure 4.6 shows the average annual sector contributions to Domestic labour productivity growth between the period 2011-2021. On average, labour productivity for the Domestic sector grew by 1.1%, largely driven by a productivity effect of 0.8% and a reallocation effect of 0.4%. Professional, Scientific & Technical (0.5%) and Administrative & Support Services (0.5%) were the largest drivers of productivity growth for the Domestic sector over the period. Financial & Insurance (-0.4%) made the most significant negative contribution, due to the after-effects of the Financial Crisis on the Banking industry. The COVID-19 pandemic also had a significant impact on Accommodation & Food Services and Transportation & Storage, which both experienced sharp falls in labour productivity in 2020 and 2021.
Labour productivity growth can also be explained by changes in capital per hour worked (capital deepening) and multifactor productivity (MFP) growth. Intangibles are the most significant type of capital used in the Irish economy, which includes patents and intellectual property products (IPP). Capital deepening is split into tangible and intangible asset contributions to provide a better picture of capital deepening across the economy.
Capital deepening is measured as the growth in capital services per hour worked, where capital services are a measure of the flow of productive services from capital assets such as Factories, Machinery and Equipment and Intangible Assets. MFP is a residual measure and is calculated by subtracting labour and capital from GVA growth. As a result, MFP attempts to capture all other effects such as changes in organisational behaviour or shifts to remote working, which are not explained by the changes in labour or capital.
Table 4.1 below explains the relationship between the different inputs in the Domestic sector. For example, Labour Productivity Growth (C) is the sum of total Capital Deepening (Column E) and MFP Growth (Column D).
| Table 4.1: Domestic Sector Gross Value Added Growth and Input Contributions 2011 - 2021 (Percentage Change)1,2 | |||||||
| Gross Value Added | Hours Worked | Labour Productivity | Multifactor Productivity | Total Capital Deepening Contribution | Tangible Capital Deepening Contribution | Intangible Capital Deepening Contribution | |
| Year | A = B + C | B | C = D + E | D | E = F + G | F | G |
| 2011 | 1.9 | -1.8 | 3.7 | 1.7 | 2.1 | 1.4 | 0.7 |
| 2012 | -3.0 | -1.0 | -2.0 | -3.4 | 1.4 | 1.1 | 0.3 |
| 2013 | 2.2 | 3.9 | -1.7 | -1.5 | -0.2 | -0.6 | 0.4 |
| 2014 | 5.8 | 3.2 | 2.7 | 0.8 | 1.9 | 1.0 | 0.9 |
| 2015 | 5.7 | 2.7 | 2.9 | -1.9 | 4.8 | * | * |
| 2016 | 2.0 | 4.9 | -2.9 | -2.1 | -0.8 | * | * |
| 2017 | 4.4 | 3.1 | 1.3 | 0.1 | 1.2 | * | * |
| 2018 | 5.9 | 2.9 | 3.0 | 1.2 | 1.8 | * | * |
| 2019 | 4.1 | 2.9 | 1.3 | 0.0 | 1.2 | * | * |
| 2020 | -7.0 | -12.2 | 5.2 | -1.0 | 6.1 | * | * |
| 2021 | 4.6 | 5.7 | -1.0 | 1.9 | -2.9 | * | * |
| 1Due to rounding, the various inputs may not sum exactly to the numbers referenced above | |||||||
| 2Tangible and Intangible Capital Deepening are supressed from 2015 onwards for confidentiality purposes | |||||||
| Timeperiod | Tangible Capital Deepening | Intangible Capital Deepening | Multifactor Productivity | Labour Productivity |
|---|---|---|---|---|
| 2011 | 1.3 | 0.9 | 1 | 3.3 |
| 2012 | 0.8 | 1.7 | -4.2 | -1.7 |
| 2013 | -0.2 | 0.2 | -2.5 | -2.5 |
| 2014 | 1.1 | 0.9 | 2.1 | 4.1 |
| 2015 | 0.4 | 51.9 | -33.9 | 18.3 |
| 2016 | -0.2 | 4.8 | -8.2 | -3.6 |
| 2017 | 0 | 1.7 | 0.8 | 2.5 |
| 2018 | 1.3 | 0.4 | 4.5 | 6.2 |
| 2019 | 0.9 | 8 | -6.7 | 2.3 |
| 2020 | 3.4 | 8.3 | 5.7 | 17.3 |
| 2021 | -0.7 | -5.5 | 11.7 | 5.5 |
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| Timeperiod | Capital Deepening | Multifactor Productivity | Labour Productivity |
|---|---|---|---|
| 2011 | 2.1 | 1.7 | 3.7 |
| 2012 | 1.4 | -3.4 | -2 |
| 2013 | -0.2 | -1.5 | -1.7 |
| 2014 | 1.9 | 0.8 | 2.7 |
| 2015 | 4.8 | -1.9 | 2.9 |
| 2016 | -0.8 | -2.1 | -2.9 |
| 2017 | 1.2 | 0.1 | 1.3 |
| 2018 | 1.8 | 1.2 | 3 |
| 2019 | 1.2 | 0 | 1.3 |
| 2020 | 6.1 | -1 | 5.2 |
| 2021 | -2.9 | 1.9 | -1 |
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A comparison of labour productivity growth for the Total Economy and the Domestic Sector analysed by capital deepening and MFP is shown above.
In 2021, for the total economy, the main source of labour productivity growth was MFP (11.7%). On the other hand, the decline in growth in the Domestic sector can be attributed to negative capital deepening (-2.9%).
In general, over the period, MFP growth as well as capital deepening have played a role in explaining Domestic labour productivity growth, while in the total economy (Figure 4.7), tangible capital deepening has not been as predominant a feature.
| Description | Tangible Capital Deepening | Intangible Capital Deepening | Multifactor Productivity | Capital Deepening | Labour Productivity |
|---|---|---|---|---|---|
| Financial & Insurance Activities (K) | 0.1 | 0.4 | 14.2 | 0 | 14.7 |
| Manufacturing - Domestic | 2.7 | -0.5 | 12 | 0 | 14.2 |
| Water Supply, Sewerage & Waste Management (E) | 5.4 | 0 | 5 | 0 | 10.4 |
| Wholesale & Retail (G) | 0.8 | -3.5 | 9.9 | 0 | 7.2 |
| Public Administration & Defence (O) | -0.7 | -0.1 | 3.5 | 0 | 2.7 |
| Domestic Sector | 0 | 0 | 1.9 | -2.9 | -1 |
| Agriculture, Forestry & Fishing (A) | 0.5 | 0 | -2.2 | 0 | -1.7 |
| Professional, Scientific & Technical Activities (M) | -0.1 | -7.6 | 4.4 | 0 | -3.3 |
| Human Health & Social Work (Q) | -0.5 | -0.1 | -2.7 | 0 | -3.3 |
| Arts, Entertainment & Recreation (R) | -4.4 | -3.3 | 1.5 | 0 | -6.3 |
| Construction (F) | 0 | 0 | -9.2 | 0 | -9.2 |
| Administrative & Support Service Activities (N) | 0 | 0 | -4.6 | -5 | -9.6 |
| Transportation & Storage (H) | 0.2 | -0.1 | -11.8 | 0 | -11.8 |
| Education (P) | -0.7 | -1.4 | -14.1 | 0 | -16.2 |
| Electricity, Gas & Steam (D) | -4.2 | -0.1 | -29.2 | 0 | -33.4 |
| Accommodation & Food Service Activities (I) | -1.8 | -0.1 | -34.4 | 0 | -36.3 |
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A sectoral analysis of Labour Productivity growth for 2021 is shown above for some key Domestic sectors. The chart shows that the Financial & Insurance had the largest increase in labour productivity growth in 2021 at over 13%. The result was mainly due to significant MFP growth and marginal growth in capital deepening.
Falls of over 30% in labour productivity growth in the Accommodation & Food sector were largely explained by the impact of COVID-19. Trends in Electricity, Gas & Steam are mainly explained by upward price trends in wholesale energy markets.
Among the Domestic sectors, tangible capital deepening had the biggest impact in the Water and Sewerage sector with capital explaining 5% of the 10% growth in labour productivity. Intangible capital deepening was negative for most domestic sectors shown, most notably Professional, Scientific and Admin (-7.6%).
| Description | Capital Deepening | Multifactor Productivity | Labour Productivity |
|---|---|---|---|
| Manufacturing - Foreign | -12.5 | 23 | 10.5 |
| Foreign Sector | -12.8 | 21.1 | 8.3 |
| Information & Communication (J) | -13.1 | 17.3 | 4.2 |
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Figure 4.10 shows labour productivity growth in the Foreign sectors broken down by Capital Deepening and Multifactor Productivity.
In ICT, labour productivity growth of 4.2% was recorded in 2021, and this was associated with a fall in capital deepening of 13.1% and an increase in MFP (17.3%). In Manufacturing - Foreign, capital deepening also fell by 12.5% and MFP increased by 23%.
These falls in capital deepening are explained by a significant fall in the onshoring of IPP. As a result, MFP accounted for the difference between labour productivity growth and capital deepening.
| Description | Tangible Capital Deepening | Intangible Capital Deepening | Multifactor Productivity | Capital Deepening | Labour Productivity |
|---|---|---|---|---|---|
| Information & Communication (J) | 0.74 | 11.26 | -3.34 | 0 | 8.65 |
| Manufacturing - Foreign | 0 | 0 | -5.9 | 13.12 | 7.23 |
| Agriculture, Forestry & Fishing (A) | 0.74 | 0 | 5.03 | 0 | 5.77 |
| Administrative & Support Service Activities (N) | 0 | 0 | -1.64 | 6.5 | 4.86 |
| Total Economy | 0.74 | 6.66 | -2.7 | 0 | 4.71 |
| Manufacturing - Domestic | 3.44 | -0.2 | 1.34 | 0 | 4.58 |
| Professional, Scientific & Technical Activities (M) | 0.03 | 5.69 | -1.73 | 0 | 3.99 |
| Arts, Entertainment & Recreation (R) | 1.04 | 0.88 | 1.79 | 0 | 3.71 |
| Water Supply, Sewerage & Waste Management (E) | 0.99 | -0.01 | 1.89 | 0 | 2.86 |
| Wholesale & Retail (G) | 0.23 | 1.38 | 0.91 | 0 | 2.52 |
| Public Administration & Defence (O) | -0.35 | -0.09 | 0.61 | 0 | 0.18 |
| Human Health & Social Work (Q) | -0.05 | 0.06 | -0.57 | 0 | -0.57 |
| Construction (F) | -0.39 | 0.03 | -1.13 | 0 | -1.48 |
| Electricity, Gas & Steam (D) | -0.46 | 0.38 | -1.63 | 0 | -1.7 |
| Education (P) | -0.2 | -0.44 | -2.32 | 0 | -2.95 |
| Transportation & Storage (H) | 0.11 | 0.06 | -3.83 | 0 | -3.65 |
| Accommodation & Food Service Activities (I) | 0.41 | 0.01 | -4.17 | 0 | -3.75 |
| Financial & Insurance Activities (K) | 0.57 | 0.51 | -5.23 | 0 | -4.16 |
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The average annual growth rate in labour productivity over the eleven-year period (2011-2021) is shown in Figure 4.11. The multinational sectors of ICT and Manufacturing - Foreign saw the largest growth in labour productivity in the period at over 7% per year. Significant intangible capital deepening occurred in ICT due to the onshoring of IPP.
Among the Domestic sectors, Accommodation & Food and Transportation & Storage experienced some of the largest decreases in labour productivity in the period. This was almost entirely explained by substantial falls in labour and MFP during the COVID-19 pandemic. Tangible capital deepening was not a significant contributor to labour productivity growth in the Domestic sectors, except for Manufacturing - Domestic. The only Domestic sector with a significant intangible contribution was Professional, Scientific & Technical activities (5.7% per year).
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