Source publication: National Income and Expenditure 2018 Tables 1-22 and Annex 1 for 1995-2018 (XLS 396KB)

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Overall labour productivity for the period 2000 to 2018 increased by an annual average of 3.4% (2.3% for 2000 to 2014). For the latest year, the result is 4.25%. The positive 2018 result was driven by the increased GVA growth in the Manufacturing and the ICT sector. This result is a continuation of the positive results over the past few years. Labour productivity has largely been positive over the years since 2010, with annual average productivity growth of 4.9% in the previous 8 years. The extreme globalisation-related events of 2015 in the Irish economy contributed to this positive result, while also leading to a spike in productivity growth in 2015 of 20.5%.

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The chart above shows the contribution of various sectors to labour productivity growth in 2018. The largest sectors that contribute to the 4% labour productivity result are the foreign dominated sectors of Manufacturing and Information and Communications. The next largest contributor is the domestic dominated sector of Wholesale and Retail, in line with the positive results reflected in the Retail Sales Index in 2018, while Mining and Quarrying and the Financial services sectors also play a small part in this growth. The presence of imputed rent in the Real Estate sector makes it difficult to reflect the true role this sector plays in contributing to growth. The negative contributors are recorded in the Public sector, however, too much emphasis should not be placed on results for these non-market sectors as Output and Value added are estimated by summing input costs. It is important to note, for example, that increased hours in the Education sector lead to reduced pupil teacher ratios, hence improving outcomes rather than improving productivity. The main negative contributor to growth in 2018 was the Agricultural sector, largely due to a fall in GVA, which was the first decline in GVA growth recorded in the sector since 2012. This decline is largely due to the decrease in cattle output combined with falling prices in the beef sector in 2018, as well as a small fall in numbers employed of 3.6% when compared with 2017.

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As highlighted in Chart 2.1 above, labour productivity growth in 2018 was 4.25%, the largest recorded since the globalisation events of 2015. This positive result has mainly occurred in the foreign dominated sectors of Manufacturing and ICT, and to some extent in Domestic and Other sectors such as Wholesale and Retail. The 2018 result has mainly been explained by an increase in GVA in these sectors, while growth in hours remained largely stable. The increase in GVA in these sectors was largely due to the positive trends in retails sales and in MNE activity in 2018.

Looking briefly at the back years, the period 2000 to 2008 recorded GVA growth and associated growth in hours of around 5%. Labour productivity growth declined in 2011 and declined further in 2012, due to increasing hours worked and declining levels of output produced. However, labour productivity declined even further in 2013 reaching a low of -1.7% as labour growth exceeded that of GVA.

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Labour productivity growth in 2018 was 0.2%, the lowest since 2013. This was due to both hours and GVA growing at the same rate of 3.8% in 2018. Looking at the previous years, the highest labour productivity growth was recorded in 2010, with productivity peaking at 10%. This was due to large falls in employment, with sectors such as Construction being badly hit. Since the Financial Crisis, labour productivity has returned to pre-crisis results, albeit with GVA growth associated with globalisation events contributing to some of the volatility in recent years, particularly in 2015 and 2016.

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The chart above shows how some of the domestic sectors performed in the Irish economy over the period. Among the sectors under examination since 2000, the trend in Wholesale and Retail has been quite volatile over the period. A large dip occurred between 2009 and 2013, as discretionary spending fell during the recessionary period, reducing hours and GVA. On the other hand, a noticeably positive trend occurred in the Construction sector during the recessionary period, which is a feature of productivity measurement at these extreme times in the economic cycle. We observe many people becoming unemployed, and the small remaining workforce becoming more productive. A small dip occurred in the Construction sector in 2018, due to hours increasing by 12% while GVA rose by 10%. The Transport sector followed a positive trend since 2012 which could be due to an increase in air travel and more commuters using public transport following the financial crisis, which in turn led to the increase in hours and GVA recorded in the sector. The noticeable increase since 2015 was associated with a period of increase in registered goods vehicles on the roads, which increased by 13.3% in 2016. The Accommodation and Food sector has followed a steady trend since 2012, however it’s labour productivity remains below the peak recorded in 2008 and 2011, due to falling hours worked and GVA.

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Labour productivity growth of 12.19% was recorded in 2018 in the Foreign sector. This increasing trend was largely due to increased levels of GVA, driven by sectors such as Manufacturing and Information and Communications, while hours worked declined from 4% in 2017 to 1.5% in 2018. As a result, the 12.19% growth in labour productivity is almost entirely explained by the positive GVA growth of 13%. The positive step changes in labour productivity since 2016 have been attributed to the positive GVA growth linked to increased globalisation.

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The above chart shows labour productivity in sectors that are typically dominated by MNE enterprises. Both the Manufacturing and ICT sector have experienced sharp and substantial increases in productivity since 2000. During the recessionary period of 2010 onwards, the ICT sector remained marginally ahead of the Manufacturing sector in terms of productivity. The Manufacturing and foreign dominated sectors have followed a very similar trend up to 2018. The reason for this is that the Foreign sector is largely dominated by sectors from Manufacturing such as Electrical Equipment, Pharmaceutical Products and Medical Supplies.

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The chart above shows labour productivity for the Market sector. The Market sectors includes all NACE categories, excluding Real Estate, Public Admin and Defence, Education, Health and Social Work. The Market sector recorded labour productivity growth of 5.6% in 2018, mainly driven by the increased level of GVA in the foreign dominated sectors such as ICT and Manufacturing in 2018. Labour productivity, taking the entire eighteen-year period as a whole recorded annual average growth of 4%, driven mainly by GVA growth which increased by an annual average of 5% over the period.

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The chart above shows annual average contributions to total labour productivity (GVA per hour) growth in the whole economy, using the standard twenty-one sector presentation of the economy. Manufacturing has made the largest annual average contribution, followed by Information and Communications and Professional, Scientific and Technical activities. It should be noted, however, that the large additions from GVA to Manufacturing occur even when the impact of globalisation events in 2015 are excluded. It is not surprising that these sectors contribute so significantly due to the large amount of MNE activity associated with them. The only negative contributions to total productivity growth over the period came from Real Estate[2] and Public Admin and Defence, although as mentioned previously a few caveats are associated with these sectors and results should be interpreted with caution. The Construction sector, the Wholesale and Retail sector and the Agriculture sector contributed very little to growth over the entire period to 2018, as these sectors, particularly, Construction and Wholesale and Retail, suffered heavily during the financial crisis. The Construction sector experienced high unemployment causing many workers to emigrate, while the Wholesale and Retail sector experienced a fall of 14% in GVA growth in 2009 while hours worked declined by 13% in in the same year. This impact was largely explained by a fall in demand with retail sales falls of almost 15% and considerably less discretionary spending occurring in the economy.

[2] Real Estate services are dominated by the imputed rents to owner occupiers - so the results have to be carefully interpreted.

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Annual average Labour Productivity for the entire period for Ireland as a whole was 3.4% which compares well with the EU 28 average of 1.25% and the Euro Area average of 1%. The highest reported result is for Ireland - Foreign Sector of 9.3% followed by Romania at 5.5%. For Ireland - Domestic and Other Sector labour productivity increased by 1.5% reflecting the importance of looking beyond the national aggregate rate. The lowest rate reported was for Italy at 0.2% for the period.