Productivity in Ireland 2019

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The chart above shows growth in hours worked and the QALI for the Construction sector, while the chart below shows QALI decomposed into Labour Composition, otherwise known as labour quality, and hours worked. It is evident from the graph above that both hours worked and QALI followed a similar pattern up until 2009. From 2009 to 2010, clear differences emerge between the two measures. In the depths of the recession, the fall in hours worked was greater than the fall in QALI. The hours measure fell more sharply as it does not account for the education or other quality indicators unlike the QALI measure. In fact, the gap between the two measures indicates that the majority of those who left the sector during the period were those who were on aggregate had a lower level of education or were less experienced when compared to the total workforce in the sector. This is also reflected in the Labour Composition in the graph below, with the increase in the Labour Composition recording results of 2.8% and 5.7% in 2009 and 2010. 

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The most recent year, 2019, saw a sharp decline in both QALI and hours worked in the sector, however a slight decrease in the labour composition also occurred, falling by 1.1%. This could be due to lower educated workers joining the workforce once again. As Construction activity picked up in 2019, demand for labourers and manual workers increased.

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The chart above compares growth in hours worked and QALI in the Accommodation and Food sector. It is clear from the graph above that both hours worked and QALI followed a similar pattern over the period. Between 2009 and 2010, a gap emerges between the two measures, with the fall in QALI greater than the drop in hours worked. This was suggestive of a small number of higher educated people leaving the sector and is reflected in the negative Labour Composition growth of -4.0%. However, slight increases occurred in Labour Composition during 2012 and 2013, as the sector recovered, which is highlighted in the chart below.

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In recent years the Labour Composition has been increasing and decreasing in line with trends in the economy, however a sizeable increase in Labour Composition occurred in 2019 of 3.2%. This is also evident in chart 10.3, where the fall in hours was greater than the fall in QALI. The increased Labour Composition may be due to higher educated workers joining the sector.

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The chart above shows the growth in the QALI and hours worked in the Manufacturing sector. Like the two sectors discussed previously, both measures follow a similar pattern over the period, albeit with a small spike in QALI in 2006. This spike is reflected in the Labour Composition of 5.7% in the chart below, with many lower skilled leaving the sector, when jobs were plentiful during the boom years. A Labour Composition gap of 7.7% emerged between the two measures in 2011, with hours worked of the lower skilled falling faster than those of the higher skilled workers.. This sector employs a mix of lower and higher skilled workers, with the foreign MNEs typically employing the higher earners. However, it was the lower skilled workers, typically from domestic owned companies, who appeared to be the first to go when the recession occurred with foreign-owned entities less impacted.

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Between 2013 and 2015, growth in QALI exceeded growth in hours as the economy recovered and the lower skilled left the sector, perhaps in search of a premium in competing industries. In 2019, Labour Composition decreased, suggesting it is the lower educated who are joining the sector.

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The chart above shows the situation in terms of growth in Quality Adjusted Labour Input and hours worked across the economy. During the early years between 2005 and 2007 when the economy was booming, and opportunities were abundant, the growth in hours outstripped growth in QALI and it was the longest period of negative Labour Composition growth. Lower skilled workers were in high demand at a time when consumer demand for goods and services was at a high.

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As the economy collapsed between 2009 and 2011 and the fall in hours was greater than QALI, employees with lower levels of education or those who were less experienced lost their jobs. This resulted in the positive Labour Composition effect of 1.1% in 2011 and was due to the recessionary effects on the economy with house building stalling, falling demand for business and personal services and lower levels of discretionary spending. Since the recession, growth has recovered and both QALI and hours have grown at a similar rate in recent years. The latter years are characterised by marginal increases in the quality of the labour force.

Get the data: PxStat PIA09 (GVA and Input Contributions),  PxStat PIA11 (Labour Composition and Hours)

The chart above shows the factor inputs in the Construction sector. During the recessionary period between 2009 and 2010, the impact of Labour Composition can be seen. The contribution of the Labour Composition to overall GVA growth increased by 3% and 6% in 2009 and 2010 respectively, while growth in hours fell sharply. Since 2015, the Labour Composition contribution has increased on average by 1.0%, indicating for that these years, higher skilled workers have joined the labour market in the sector. Over the entire period, Labour Composition has been a significant factor, particularly in explaining GVA growth in the Construction sector.

Get the data: PxStat PIA09 (GVA and Input Contributions),  PxStat PIA11 (Labour Composition and Hours)

The chart above shows the factor inputs in the total economy. Similar to the Construction sector, the Labour Composition is presented for illustrative purposes. Unlike the Construction sector, however, the impact of Labour Composition is not particularly evident in the chart. As the total economy encompasses both foreign and domestic dominated sectors, some sectors such as Construction suffered badly during the crisis, while other foreign dominated sectors, such as Manufacturing were not as heavily impacted. This resulted in an overall balancing out of Labour Composition effects in the economy.