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.
The following chapter provides an analysis of Quality-Adjusted Labour Input (QALI) for the Irish economy. The traditional measure of labour input is hours worked which is used throughout the publication. While using hours worked is appropriate to measure the quantity of labour input, it fails to capture the differences in the quality of those hours, as not all hours worked are equally productive e.g., a brain surgeon compared to a labourer. The QALI methodology attempts to quantify the change in the quality of hours worked by weighting hours growth by the earnings associated with those hours. The underlying assumption is that workers with higher earnings are providing higher quality and more productive labour input. The difference between the QALI and hours growth estimates is generally referred to as the composition effect, which is used to measure changes in the quality of the workforce.
The QALI results are provided at both the ten sector (A10) and total economy levels. While the aggregate measures of hours worked and earnings are sourced from the National Accounts, the data used to capture differences in hours worked (by Sex, Age and Level of Education) in this case is taken from the European Union Survey on Income and Living Conditions (EU-SILC)1. It should be noted that the results shown are labelled as Experimental Statistics rather than the Official Statistics seen elsewhere in the publication.
1 Given the relatively small sample size associated with each category in the EU-SILC, the data is presented at the A10 level rather than the A21 level seen elsewhere in the publication.
| Table 12.1 QALI Growth Results by Sector: 2021 (Percentage Change) | |||
| Sector | QALI | Hours | Composition |
| Agriculture, Forestry & Fishing (A) | -12.1 | 2.1 | -14.2 |
| Industry (excl. Construction) (B-E) | 3.2 | 6.0 | -2.8 |
| Construction (F) | 0.3 | 6.0 | -5.7 |
| Distribution, Transport, Hotels & Restaurants (G-I) | 7.5 | 3.9 | 3.6 |
| Information & Communication (J) | 10.7 | 10.7 | -0.1 |
| Financial & Insurance Activities (K) | 3.6 | 1.7 | 1.9 |
| Real Estate Activities (L) | 12.6 | 10.1 | 2.4 |
| Professional, Administrative & Support Services (M-N) | 8.7 | 8.7 | 0.0 |
| Public Administration, Education & Health (O-Q) | 8.5 | 8.1 | 0.4 |
| Arts, Entertainment & Other Services (R-T) | 14.7 | 10.3 | 4.4 |
| Total Economy | 6.7 | 6.4 | 0.3 |
QALI for the total economy grew by 6.7% in 2021, almost entirely recovering from the 6.9% fall in 2020. The increase was almost entirely driven by the increase in hours worked of 6.4%, but there was also a small composition effect of 0.3%. The increase in hours worked was largely a rebound from the fall in hours worked in 2020 due to the COVID-19 pandemic, while the small composition effect was driven by mixed results across sectors.
The key benefit of the QALI index is that it makes it possible to measure the change in the quality of the hours worked in a sector, which is labelled as a Composition Effect. Looking at the composition effect across sectors, only Agriculture, Industry and Construction saw significant falls in the quality of their labour input in 2021, while all other sectors experienced either relatively small or no changes in their labour quality.
The composition effect for each sector reflects changes in the shares of total hours worked and total earnings for age, sex and education level categories within that sector. For example, in Table 12.2 below, Distribution, Transport, Hotels & Restaurants had a positive composition effect of 3.6% in 2021. This was largely due to a decrease in hours worked for the category Male, 15-29, Leaving Cert.
| Description | Hours | Labour Composition | QALI |
|---|---|---|---|
| Total Economy | 6.35419635123444 | 0.337730367778066 | 6.69192671901251 |
| Public Administration, Education & Health (O-Q) | 2.04597933212069 | 0.355311891950031 | 2.40129122407073 |
| Distribution, Transport, Hotels & Restaurants (G-I) | 0.792964146410071 | 0.447747428777563 | 1.24071157518763 |
| Professional, Administrative & Support Services (M-N) | 1.07747445026936 | 0.14538521096533 | 1.22285966123469 |
| Information & Communication (J) | 0.801423605771442 | 0.175072360365208 | 0.976495966136649 |
| Industry (excl. Construction) (B-E) | 0.915386704256409 | -0.483543293701504 | 0.431843410554905 |
| Arts, Entertainment & Other Services (R-T) | 0.226800651163887 | 0.084582121498729 | 0.311382772662616 |
| Financial & Insurance Activities (K) | 0.104892107871456 | 0.183277057582651 | 0.288169165454107 |
| Real Estate Activities (L) | 0.0490696194467919 | 0.0894034200798939 | 0.138473039526686 |
| Construction (F) | 0.435482930181735 | -0.41373954718415 | 0.0217433829975846 |
| Agriculture, Forestry & Fishing (A) | -0.0952771962573984 | -0.245766282555686 | -0.341043478813084 |
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The growth in QALI of 6.7% for the total economy can be decomposed into the contributions from each economic sector as shown above in Figure 12.1. With the exception of Agriculture, every sector made a positive contribution to QALI for the total economy in 2021. These contributions can be decomposed into changes in hours worked and changes in the quality of those hours worked (Composition effect). Public Administration, Education & Health (2.4%) made the single largest positive contribution to overall QALI, largely due to its contribution to total hours growth (2%), but also as a result of its contribution to the overall quality of the labour force (0.4%).
| category | Hours | Labour Composition | QALI |
|---|---|---|---|
| Total Economy | 6.35419635123444 | 0.337730367778066 | 6.69192671901251 |
| Male, 50+, Leaving Cert | 3.39283481285797 | -1.04787976134365 | 2.34495505151432 |
| Male, 50+, Post-Leaving Cert | 1.4379172112701 | 0.667074740730331 | 2.10499195200043 |
| Male, 30-49, Leaving Cert | 2.57212591706141 | -0.747231840929627 | 1.82489407613178 |
| Female, 30-49, Leaving Cert | 1.81409912952882 | -0.165349210319275 | 1.64874991920955 |
| Male, 50+, Junior Cert or Lower | 3.43394687587504 | -1.89997344572443 | 1.53397343015061 |
| Female, 50+, Leaving Cert | 1.34221483610115 | -0.214927079245657 | 1.1272877568555 |
| Male, 30-49, Junior Cert or Lower | 0.600939191189422 | -0.090317875416689 | 0.510621315772733 |
| Female, 50+, Junior Cert or Lower | 0.387057252122414 | -0.101117886645393 | 0.285939365477021 |
| Male, 15-29, Post-Leaving Cert | -0.251505149012644 | 0.526673388962313 | 0.275168239949669 |
| Female, 50+, Post-Leaving Cert | 0.0958779643688147 | 0.100096412966016 | 0.195974377334831 |
| Female, 15-29, Junior Cert or Lower | 0.116351041790107 | -0.0518959456625607 | 0.0644550961275461 |
| Female, 30-49, Junior Cert or Lower | 0.079891006287692 | -0.0453475593593811 | 0.0345434469283109 |
| Male, 15-29, Junior Cert or Lower | -0.257947883547426 | 0.151373249764864 | -0.106574633782562 |
| Female, 15-29, Post-Leaving Cert | -1.06416760786135 | 0.388187472087578 | -0.675980135773771 |
| Female, 15-29, Leaving Cert | -1.41191991488958 | 0.712957019531587 | -0.698962895357992 |
| Male, 15-29, Leaving Cert | -1.9799760094035 | 1.11931702521443 | -0.860658984189068 |
| Female, 30-49, Post-Leaving Cert | -1.14269963008366 | 0.123520879602155 | -1.01917875048151 |
| Male, 30-49, Post-Leaving Cert | -2.81084269242034 | 0.912570783565452 | -1.89827190885489 |
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Contributions to the total economy growth in QALI of 6.7% can also be decomposed into the contributions of each category of worker in the economy, stratified by Sex, Age and Education Level as shown in Figure 12.2. There were contrasting contributions of categories to QALI growth in 2021, with the largest positive contributions from Male, 50+ categories, and the most negative contributions from 30-49, Post-Leaving Cert categories. In almost all cases, the contribution to QALI growth was due to changes in hours worked rather than changes in labour quality. In general, the contribution to overall labour quality moved in the opposite direction to growth in hours worked, with very few exceptions. This means that when hours worked increased (decreased) for a category, they tended to be of relatively lower (higher) quality than the other hours worked for that category.
| Timeperiod | Hours | Labour Composition | QALI |
|---|---|---|---|
| 2011 | -1.79664424794869 | 1.11385379755772 | -0.682790450390967 |
| 2012 | -0.744347098266097 | 1.27662374720557 | 0.532276648939474 |
| 2013 | 3.76903662652961 | 1.81734594717662 | 5.58638257370624 |
| 2014 | 3.2647927602252 | 0.204851578268678 | 3.46964433849387 |
| 2015 | 3.04653951043542 | 0.313456958893566 | 3.35999646932899 |
| 2016 | 4.98686148745961 | 0.0252971364067003 | 5.01215862386631 |
| 2017 | 4.09992203269753 | 0.27969488476469 | 4.37961691746222 |
| 2018 | 3.61462778305762 | 1.36168021988211 | 4.97630800293973 |
| 2019 | 2.93519390780825 | -0.377735852425295 | 2.55745805538296 |
| 2020 | -10.1618205064327 | 1.69673896380056 | -8.4650815426321 |
| 2021 | 6.35419635123444 | 0.337730367778066 | 6.69192671901251 |
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Figure 12.3 illustrates changes in QALI over the period 2011-2021, decomposing QALI growth into changes in hours worked and changes in the quality of those hours. The growth in QALI of 6.7% in 2021 came after a fall of 8.5% in 2020, meaning that the QALI index was still below 2019 (pre-COVID) levels. QALI has generally tracked the movement of hours worked in recent years, with relatively small composition effects in most years. The large composition effect of 1.4% in 2018 was largely due to wage growth in highly-paid sectors such as ICT and Finance. On the other hand, the large composition effect of 1.7% in 2020 was due to sharp reductions in hours worked in generally lower-paid sectors such as Accommodation & Food and Transport. In general, the overall quality of labour in the Irish economy increased over the period 2011-2021.
| Table 12.3 Gross Value Added Growth Decomposition with Labour Composition by Sector: 2021 (Percentage Change)1 | ||||||
| Gross Value Added | Labour Contribution | Capital Contribution | Multifactor Productivity | Composition Effect | Adjusted MFP | |
| A = B + C + D | B | C | D | E | F = D - E | |
| Agriculture, Forestry & Fishing (A) | 0.4 | 1.4 | 1.2 | -2.2 | -9.5 | 7.3 |
| Industry (excl. Construction) (B-E) | 19.4 | 0.6 | -2.1 | 20.8 | -0.3 | 21.1 |
| Construction (F) | -3.2 | 3.9 | 2.1 | -9.2 | -3.7 | -5.6 |
| Distribution, Transport, Hotels & Restaurants (G-I) | 3.7 | 2.2 | -1.6 | 3.1 | 2.1 | 1.0 |
| Information & Communication (J) | 15.0 | 1.6 | -4.0 | 17.3 | 0.0 | 17.3 |
| Financial & Insurance Activities (K) | 16.4 | 0.9 | 1.2 | 14.2 | 1.0 | 13.2 |
| Real Estate Activities (L) | 6.4 | 0.6 | 1.3 | 4.6 | 0.1 | 4.5 |
| Professional, Administrative & Support Services (M-N) | 0.6 | 3.3 | -2.4 | -0.3 | 0.0 | -0.3 |
| Public Administration, Education & Health (O-Q) | 3.0 | 6.9 | 0.1 | -3.9 | 0.3 | -4.3 |
| Arts, Entertainment & Other Services (R-T) | 1.4 | 6.5 | 0.0 | -5.0 | 2.7 | -7.8 |
| Total Economy | 11.9 | 1.9 | -1.7 | 11.7 | 0.1 | 11.6 |
| 1Due to rounding, the various inputs may not sum exactly to the numbers referenced above | ||||||
One key issue associated with only using hours worked as the measure of labour input is that it leads to changes in the quality of the labour force being captured as changes in Multifactor Productivity (MFP), rather than changes in labour input. A Composition-Adjusted MFP growth rate can be calculated by subtracting the labour composition effect (multiplied by the labour share) from the original MFP growth. Table 12.3 illustrates the effect of this adjustment on MFP growth in 2021. Given the experimental nature of these QALI estimates, this adjustment to MFP growth is not applied in the rest of the publication.
| Description | Hours | Labour Composition | QALI |
|---|---|---|---|
| Total Economy | 1.76075987334548 | 0.7317761590281 | 2.49253603237358 |
| Public Administration, Education & Health (O-Q) | 0.704419520427715 | 0.209613408087553 | 0.914032928515268 |
| Professional, Administrative & Support Services (M-N) | 0.331100136254803 | 0.0522285645247362 | 0.383328700779539 |
| Information & Communication (J) | 0.317118489742449 | 0.043784819847054 | 0.360903309589503 |
| Industry (excl. Construction) (B-E) | 0.31912487062962 | 0.00563497098538845 | 0.324759841615009 |
| Financial & Insurance Activities (K) | 0.105219794217125 | 0.130375006018815 | 0.23559480023594 |
| Distribution, Transport, Hotels & Restaurants (G-I) | 0.00594622414988833 | 0.1217513477398 | 0.127697571889689 |
| Construction (F) | 0.191579617840186 | -0.111216622059064 | 0.0803629957811215 |
| Real Estate Activities (L) | 0.0309105604988198 | 0.0494299688780839 | 0.0803405293769037 |
| Arts, Entertainment & Other Services (R-T) | -0.04392040146108 | 0.0647512894808213 | 0.0208308880197413 |
| Agriculture, Forestry & Fishing (A) | -0.200738938954049 | 0.165423405524913 | -0.0353155334291361 |
Get the data: PxStat PIA17
Average QALI growth for the period 2011 to 2021 was 2.5%, with average hours growth of 1.8% and an average composition effect of 0.7%. The largest positive contributor to QALI growth over the period was Public Administration, Education and Health (0.9%), while Agriculture (<-0.1%) made the only negative contribution. Apart from Construction (-0.1%), all sectors in the economy made a positive average contribution to the total economy composition effect.
| Table 12.4 Average QALI Growth Results by Sector: 2011-2021 (Percentage Change) | |||
| Sector | QALI | Hours Worked | Composition Effect |
| Agriculture, Forestry & Fishing (A) | -1.5 | -0.9 | -0.6 |
| Industry (excl. Construction) (B-E) | 2.5 | 2.1 | 0.3 |
| Construction (F) | 2.6 | 3.4 | -0.8 |
| Distribution. Transport, Hotels & Restaurants (G-I) | 0.4 | 0.0 | 0.4 |
| Information & Communication (J) | 4.8 | 4.8 | 0.1 |
| Financial & Insurance Activities (K) | 2.8 | 1.9 | 0.9 |
| Real Estate Activities (L) | 7.4 | 2.9 | 4.5 |
| Professional, Administrative & Support Services (M-N) | 3.2 | 2.9 | 0.3 |
| Public Administration, Education & Health (O-Q) | 3.2 | 2.8 | 0.4 |
| Arts, Entertainment & Other Services (R-T) | 0.8 | -0.6 | 1.4 |
| Total Economy | 2.5 | 1.8 | 0.7 |
Table 12.4 shows a decomposition of average QALI growth rates by sector for the period 2011-2021. Apart from Agriculture (-1.5%), every sector had positive QALI growth on average for the period, with Real Estate (7.4%) and Information & Communication (4.8%) the two sectors with the largest average growth rates. Agriculture (-0.9%) and Arts, Entertainment & Other Services (-0.6%) were the only sectors that saw significant average decreases in hours worked over the period. This is largely due to the considerable reductions in hours worked across the economy in 2020 and 2021 due to the COVID-19 pandemic. The overall quality of the labour force improved across most sectors in the economy over the period 2011-2021, with an average composition effect of 0.7%.
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