Productivity measures the efficiency with which an economy transforms inputs (labour and capital) into outputs. As such, productivity is a key factor of national competitiveness. Ultimately, productivity is the main engine of economic growth in the medium to longer run and the main driver of improvements in living standards by determining sustainable wage levels and financing of public services.
The most widely used productivity metric is labour productivity, which is measured as output (e.g. GDP or GVA) per person engaged or output per hour worked.
The OECD published on February 8th new estimates for 2017 showing that the labour productivity of Ireland’s workforce was the highest among advanced countries with output per hour worked of $99.5 (€87).
Following a request by the Irish Times, the Central Statistics Office - CSO (not the Central Bank, as clarified with the Deputy) has released details of their forthcoming study showing that overall labour productivity for Ireland in 2017 was $87.30 (€77), which is relatively close to the OECD results. The small differences arise mainly from the unit of measurement used for comparison purposes.
Unlike the OECD, who only published headline figures for the total economy, the CSO also provided the Irish Times with initial estimates of labour productivity for the Domestic Sector showing that output per hour worked in 2017 was $54.20 (€47.80), which is significantly lower than OECD headline figure of $99.50 (€87). This substantial difference arises from the impact of large foreign-owned multinational corporations on Ireland’s headline figures of labour productivity.
Following recommendations from the National Competitiveness Council, the CSO published in May 2018 “Productivity in Ireland 2016” including separate results for the Domestic and Foreign-dominated sectors.
The CSO report indicated that overall labour productivity increased by 97 % in Ireland over the period 2000-2016. However, labour productivity in the foreign-dominated sector had increased by 342 % compared to just 49 % growth in the Domestic sector.
These CSO results, which will be updated for 2017 in the first half of 2019, illustrate the large productivity differences between both sectors, particularly after the impact that foreign firms had on official statistics in 2015 and thereafter.
Over the past year, my Department staff has published economic research highlighting the increasing productivity gap between the most and least productive firms in Ireland and measuring the impact of large foreign-owned firms to aggregate productivity growth.
My Department with the Department of An Taoiseach is leading on the development of Future Jobs Ireland, which is a new whole of government, multi-annual framework designed with the aim of integrating innovation and resilience into our economy. It will ensure our enterprises and workers are well positioned to adapt to the technological and other transformational changes our economy and society will face in the years ahead. In particular, a Future Jobs pillar on increasing the productivity of Irish SMEs will focus on actions to boost the productivity performance of SMEs including through improving management skills and facilitating linkages between SMEs and multinational firms.