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 as 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 hours worked.
To construct the QALI index, hours worked are stratified by three variables which capture key differences in labour input: Age, Education and Sex [1].
The index is provided at both a ten sector (A10) and total economy levels. While the aggregate measures of hours worked and earnings are sourced from the National Accounts, the data on Age, Education and Sex is taken from the European Union Survey on Income and Living Conditions (EU-SILC). Given the relatively small sample size associated with each category in the EU-SILC, the data is presented at an A10 level rather than the A21 level seen elsewhere in the publication. Due to these constraints, the results shown are labelled as Experimental Statistics rather than as the Official Statistics provided in all other chapters of the publication.
[1] For example: Males, 15-29, Leaving Cert
| Table 10.1: QALI Growth Results by Sector for 2020 | |||
| Description | QALI (%) | Hours (%) | Composition (%) |
| Agriculture, Forestry & Fishing (A) | 4.5 | -5.2 | 9.7 |
| Industry (excl. Construction) (B-E) | -4.6 | -2.1 | -2.5 |
| Construction (F) | -23.6 | -22.3 | -1.3 |
| Distribution, Transport, Hotels & Restaurants (G-I) | -21.3 | -18.1 | -3.2 |
| Information & Communication (J) | 4.5 | 2.3 | 2.2 |
| Financial & Insurance Activities (K) | 12.7 | 8.8 | 3.9 |
| Real Estate Activities (L) | 17.3 | 12.3 | 5.0 |
| Professional, Administrative & Support Services (M-N) | -7.2 | -5.2 | -2.0 |
| Public Administration, Education & Health (O-Q) | -3.4 | -2.5 | -0.9 |
| Arts, Entertainment & Other Services (R-T) | -38.0 | -39.7 | 1.8 |
| Total Economy | -6.9 | -8.6 | 1.7 |
QALI for the total economy fell by 6.9% in 2020, less than the 8.6% fall in hours, and leading to a positive composition effect of 1.7%. The positive composition effect was generally attributable to a reduction in lower-paid hours rather than an increase in higher-paid hours, with large but relatively lower-paid sectors such as Distribution, Transport, Hotels & Restaurants and Construction seeing much larger falls in hours worked and QALI than the rest of the economy. These sectors also saw large decreases in wages due to the temporary lockdowns imposed during the COVID-19 pandemic. Both Finance (3.9%) and ICT (2.2%) had positive composition effects for 2020. The growth in Finance was driven by increases in wages for higher-educated workers. A significant reduction in lower-paid hours for the youngest age bracket (15-29) contributed to the result for the ICT sector, which includes sectors impacted by COVID-19 such as Publishing, Broadcasting & Other Media which saw large falls in hours worked in 2020.
In 2020, QALI growth generally moved in the same direction as hours worked and exceeded hours growth in magnitude, meaning that when hours fell, the overall quality of those hours also fell.
| Description | Hours | Labour Composition | QALI |
|---|---|---|---|
| Financial & Insurance Activities (K) | 0.409778285652407 | 0.604201020336756 | 1.01397930598916 |
| Information & Communication (J) | 0.102930658493791 | 0.308810708039344 | 0.411741366533136 |
| Real Estate Activities (L) | 0.10146666212463 | 0.062216831940982 | 0.163683494065613 |
| Agriculture, Forestry & Fishing (A) | -0.210180390084332 | 0.335651536642759 | 0.125471146558427 |
| Industry (excl. Construction) (B-E) | -0.192052538877454 | -0.429375912258228 | -0.621428451135682 |
| Public Administration, Education & Health (O-Q) | -0.578422991638921 | -0.34439396801654 | -0.922816959655461 |
| Arts, Entertainment & Other Services (R-T) | -1.27940731556735 | 0.313237379026977 | -0.966169936540373 |
| Professional, Administrative & Support Services (M-N) | -0.668776731835261 | -0.30715558735156 | -0.975932319186821 |
| Construction (F) | -1.76416617789558 | 0.6224371294065 | -1.14172904848908 |
| Distribution, Transport, Hotels & Restaurants (G-I) | -4.52517698506844 | 0.577270864378554 | -3.94790612068989 |
| Total Economy | -8.60400752469651 | 1.74290000214554 | -6.86110752255097 |
Get the data: PxStat PIA14
The contraction in QALI of -6.9% for the total economy in 2020 can be decomposed into the contributions from each A10 sector as shown above in Figure 10.1. Distribution, Transport, Hotels & Restaurants as well as Construction made the largest negative contributions, while Financial and Insurance activities made the largest positive contribution.
Contributions of 1% and 0.4% to QALI growth were recorded in the Finance and ICT sectors in 2020 and this was due to the positive contribution from the composition effect and hours worked of both of these sectors. As seen in Chapter 4, these were two of the highest paid sectors in the economy and they each made a larger contribution to overall wages, driving up QALI for the total economy.
| category | Hours | Labour Composition | QALI |
|---|---|---|---|
| Female, 15-29, Post-Leaving Cert | 0.6287964689145 | -0.0660015170484507 | 0.562794951866049 |
| Male, 30-49, Leaving Cert | 0.260280013588964 | 0.231966262183194 | 0.492246275772157 |
| Female, 15-29, Leaving Cert | 0.606741542945475 | -0.334657308414335 | 0.272084234531141 |
| Male, 15-29, Junior Cert or Lower | 0.589582526857802 | -0.355464519824328 | 0.234118007033474 |
| Male, 30-49, Post-Leaving Cert | -0.0027849373278488 | 0.189505623726546 | 0.186720686398697 |
| Female, 15-29, Junior Cert or Lower | -0.0135282223262952 | 0.00931605166358535 | -0.00421217066270983 |
| Female, 30-49, Junior Cert or Lower | -0.032267117263675 | 0.0117399693711063 | -0.0205271478925688 |
| Female, 50+, Leaving Cert | 0.00368723096062825 | -0.0823625407507904 | -0.0786753097901621 |
| Male, 50+, Leaving Cert | -0.410938884503284 | 0.32244718978632 | -0.088491694716964 |
| Female, 50+, Junior Cert or Lower | -0.145343172321548 | 0.0341281458514464 | -0.111215026470101 |
| Male, 15-29, Leaving Cert | -0.784557611450634 | 0.666916084726977 | -0.117641526723657 |
| Male, 15-29, Post-Leaving Cert | -0.200007034200211 | -0.498618812824467 | -0.698625847024678 |
| Female, 30-49, Leaving Cert | -1.26735902786169 | 0.346844179289776 | -0.920514848571913 |
| Male, 30-49, Junior Cert or Lower | -1.93341668135709 | 0.866822782880521 | -1.06659389847657 |
| Female, 30-49, Post-Leaving Cert | -1.65763904162704 | 0.555426495748644 | -1.1022125458784 |
| Female, 50+, Post-Leaving Cert | -1.09475640243138 | -0.317066736569631 | -1.41182313900101 |
| Male, 50+, Post-Leaving Cert | -1.36888766020432 | -0.115033576372314 | -1.48392123657664 |
| Male, 50+, Junior Cert or Lower | -1.78160951508887 | 0.276992228721747 | -1.50461728636712 |
| Total Economy | -8.60400752469651 | 1.74290000214554 | -6.86110752255097 |
Get the data: PxStat PIA14
The QALI index (see Appendix) is created by weighting the hours growth of 18 distinct categories of Age, Education and Sex as seen above, where the weights are the relative contribution of each category to overall labour compensation. Similar to the decomposition of QALI growth by A10 sector, the contribution to the overall composition effect relates to both hours growth and relative changes in the distribution of earnings in the total economy. All but four of the categories saw reductions in hours worked for 2020, with many categories having falls in both hours worked and QALI. Despite the falls in hours worked, many of the categories made large contributions to the composition effect. For example, the least-experienced category (Male, 30-49, Junior Cert) had a contribution of -1.9% to overall hours, but a positive composition contribution of 0.9%, as there were relatively fewer less- experienced and lower-educated hours in the overall economy than in 2019. There were negative contributions to the composition effect from the highest quality categories (Male and Female, 50+, Post-Leaving Cert) due to their falls in hours worked (-1.4% and -1.1% respectively).
| Timeperiod | Hours | Labour Composition | QALI |
|---|---|---|---|
| 2011 | -1.28035818255065 | 1.01672154410768 | -0.263636638442968 |
| 2012 | -0.471671705464849 | 1.46765509241511 | 0.995983386950263 |
| 2013 | 3.22817151064891 | 1.76833589305484 | 4.99650740370375 |
| 2014 | 3.43894111778647 | -0.111940199200171 | 3.32700091858629 |
| 2015 | 4.32246969923242 | 0.348819193818268 | 4.67128889305069 |
| 2016 | 3.2157905811357 | 0.108121966107864 | 3.32391254724357 |
| 2017 | 3.63781871937866 | 0.0140787457600891 | 3.65189746513875 |
| 2018 | 3.51470657597341 | 1.22013467598415 | 4.73484125195756 |
| 2019 | 2.24811606469183 | -0.452768137488516 | 1.79534792720331 |
| 2020 | -8.60400752469651 | 1.74290000214554 | -6.86110752255097 |
Get the data: PxStat PIA14
QALI for the total economy fell by 6.9% in 2020, the first reduction in QALI since 2011. Hours worked fell by 8.6%, resulting in a positive composition effect of 1.7%, the largest change in the quality of the workforce since 2009 (3.6%). QALI has generally tracked the movement of hours worked in recent years, with relatively small composition effects until 2020. The large composition effect of 1.2% in 2018 was largely attributable to wage growth in higher-paid sectors such as ICT and Finance which exceeded wage growth in lower-paid sectors such as Distribution, Transport, Hotels & Restaurants. In general, the overall quality of labour in the Irish economy increased over the period 2011-2020, with the COVID-19 pandemic having the effect of temporarily accelerating this growth.
| Description | Hours | Labour Composition | QALI |
|---|---|---|---|
| Total Economy | 1.32499768561353 | 0.712205877670529 | 2.03720356328406 |
| Public Administration, Education & Health (O-Q) | 0.429157987356131 | 0.153705994857899 | 0.58286398221403 |
| Professional, Administrative & Support Services (M-N) | 0.369961932214 | 0.0454651109527774 | 0.415427043166778 |
| Industry (excl. Construction) (B-E) | 0.226616478367957 | 0.0671406288584898 | 0.293757107226447 |
| Information & Communication (J) | 0.192873868906547 | 0.093610533869443 | 0.28648440277599 |
| Financial & Insurance Activities (K) | 0.118701913126853 | 0.137826822522583 | 0.256528735649437 |
| Distribution, Transport, Hotels & Restaurants (G-I) | 0.0211630447459219 | 0.0542588503542212 | 0.0754218951001431 |
| Construction (F) | 0.167442001291536 | -0.0953649659265701 | 0.0720770353649662 |
| Real Estate Activities (L) | 0.0274757814645858 | 0.0320487902737623 | 0.0595245717383481 |
| Agriculture, Forestry & Fishing (A) | -0.162426481890374 | 0.168228952146652 | 0.00580247025627826 |
| Arts, Entertainment & Other Services (R-T) | -0.0659688399696277 | 0.0552851597612711 | -0.0106836802083566 |
Get the data: PxStat PIA14
Average annual QALI growth for the period 2011 to 2020 was 2.0%, with average hours growth of 1.3% and an average composition effect of 0.7%. The largest contributors to QALI growth over the period were Public Administration, Education & Health (0.6%) and Professional, Administrative & Support Services (0.4%). Apart from the Construction sector (-0.1%), all sectors in the economy made a positive average contribution to the total economy composition effect, while every sector other than Arts, Entertainment & Other Services made a positive average contribution to overall QALI growth. Agriculture contributed the most to the average composition effect (0.2%), as it was the lowest paid sector and had an average fall in hours of 0.2% over the period.
| Table 10.2: Average QALI Growth Results by Sector – 2011-2020 | |||
| Description | QALI (%) | Hours (%) | Composition (%) |
| Agriculture, Forestry & Fishing (A) | 0.0 | -0.7 | 0.7 |
| Industry (excl. Construction) (B-E) | 2.2 | 1.6 | 0.5 |
| Construction (F) | 2.4 | 2.9 | -0.4 |
| Distribution. Transport, Hotels & Restaurants (G-I) | 0.1 | 0.0 | 0.1 |
| Information & Communication (J) | 4.1 | 4.0 | 0.1 |
| Financial & Insurance Activities (K) | 3.1 | 2.3 | 0.8 |
| Real Estate Activities (L) | 5.8 | 1.2 | 4.6 |
| Professional, Administrative & Support Services (M-N) | 3.6 | 3.2 | 0.3 |
| Public Administration, Education & Health (O-Q) | 2.0 | 1.7 | 0.4 |
| Arts, Entertainment & Other Services (R-T) | -0.8 | -1.9 | 1.1 |
| Total Economy | 2.0 | 1.3 | 0.7 |
The overall quality of the labour force (QALI) improved across most sectors in the economy over the period 2011-2020, with an average composition effect of 0.7%. Other than Construction (-0.4% per year), all sectors in the economy had an average positive composition effect, ranging from 0.1% to 1.1% per year (excluding Real Estate).
The largest average percentage increases in QALI over the period were in Real Estate (5.8%), ICT (4.1%) and Professional, Administrative & Support Services (3.6%), with ICT also having the largest average growth in hours of 4.0% per year. Agriculture (-0.7%) and Arts, Entertainment & Other Services (-1.9%) were the only sectors that saw decreases in hours worked, largely due to the considerable reductions in hours across the economy in 2020 due to the COVID-19 pandemic.
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