Irish labour productivity growing at three times EU rate

Labour productivity in the Republic has been growing at three times the EU rate since 2000, new figures from the Central Statistics Office (CSO) show.

The efficiency of the workforce here grew by an average of 3.9 per cent between 2000 and 2017 compared to an EU average of 1.3 per cent. The lowest rate reported was for Luxembourg at 0.2 per cent for the period.

Labour productivity typically measures the value of work done in an economy over time, with higher value-added jobs generating the greatest productivity increases. Increases in labour productivity tend to be associated with improvements in wages and living standards.

But the CSO cautioned that the high concentration of multinationals here has a substantial impact on the numbers.

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“There are many instances of very high productivity growth that result in a limited spillover into the domestic and other sector of the economy and in turn to Irish households,” it said.

In the Republic’s domestic sector, without foreign multinationals, average annual labour productivity grew at around 2.2 per cent between 2000 and 2017.

In the foreign sector, the average annual growth rate was almost 9.3 per cent for the entire period.

‘Leprechaun economics’

The figures recorded a significant increase in 2015, the same year that saw a massive influx of multinational assets and an unprecedented 26 per cent jump in gross domestic product (GDP), later derided as “leprechaun economics”.

The figures also show that the value of capital stock per employee increased from €152,000 to €381,000, an increase of 150 per cent, during the 17-year period.

Earlier this year, the Organisation for Economic Co-operation and Development (OECD) produced figures suggesting Irish workers were the most productive in the world, adding an average of $99.50 (€87) to the value of the economy every hour they worked.

The Republic's rate was also significantly higher than its biggest trading partners, the United States ($72) and the United Kingdom ($61.10), and nearly twice the OECD average of $54.80.

OECD figures, published in February, suggested Irish workers were the most productive on the planet, adding an average of $99.50 (€87) to the value of the Irish economy for every hour they worked in 2017.

This put them ahead in workers in competitor countries such as the UK, France and Germany. The Republic's rate was also nearly twice the OECD average.

CSO figures, however, showed workers in the domestic sector here, which excludes multinationals, added an average $54.20 (€47.87) to the value of the economy for every hour they worked in 2017. This was less than the OECD average.

Productivity growth in the UK has all but flatlined since the financial crisis a decade ago, depressing wage growth.

The UK's annual productivity growth has averaged about 0.5 per cent since the recovery compared to over 2 per cent in the year prior to 2008, leaving Britain lagging behind most of its G7 peers.

The so-called “productivity puzzle” has perplexed UK economists. Many believe the new jobs created since in the crash are predominantly in low-skilled, low-paid sectors where productivity is low anyway.