Analysis of the labour share of the Irish economy is presented in this chapter. The labour share is defined as the proportion of Gross Value Added (GVA) attributed to labour (as wages) with the remainder being attributed to capital (as profits). Higher labour shares are typically found in traditionally labour-intensive sectors such as Accommodation & Food, while capital-intensive sectors such as ICT and Manufacturing tend to have lower labour shares. The increased globalisation of the Irish economy has resulted in ongoing additions to the Capital Stock and in particular additions of intangibles such as Intellectual Property Products (IPP). These additions have the effect of decreasing the labour share. This chapter highlights the impact that this trend in investment has had on the labour share of GVA in the economy.
| Timeperiod | Domestic and Other Sector | Foreign Sector | Total Economy |
|---|---|---|---|
| 2011 | 60.0685827865757 | 22.6371628902448 | 50.6184911027588 |
| 2012 | 58.7815734953896 | 21.9562675432732 | 49.3415477405705 |
| 2013 | 56.998769186385 | 23.012316987558 | 48.4936962189406 |
| 2014 | 55.0454202757602 | 23.1120970465511 | 47.0200432902079 |
| 2015 | 53.3118971678751 | 16.6343593309613 | 40.6336194517242 |
| 2016 | 52.9100776568695 | 11.5314165254483 | 36.0502243987906 |
| 2017 | 53.2049335436663 | 11.8538971294233 | 36.4247388475651 |
| 2018 | 52.4777129221255 | 11.2264605163784 | 35.0556751768569 |
| 2019 | 51.7485594377028 | 10.7844173008501 | 33.6467991884663 |
| 2020 | 52.2717958167849 | 10.315362827458 | 32.1839709947014 |
Source Publication: National Income and Expenditure 2020
Get the data: PxStat PIA12
The labour share for the total economy was 32.2% in 2020, continuing a downward trend that began more than ten years earlier. Over time, a lower proportion of the income of the Irish economy has gone directly to workers. The low labour share for the total economy is largely explained by the extremely low labour share for the Foreign sector of just 10.3%. While wages increased by 8% in this sector in 2020, profits grew much faster, so the labour share declined marginally from 10.8% in 2019. For the Domestic and Other sector, the labour share was 52.3% in 2020, more than five times the size of the labour share for the foreign sector and reflecting the relatively low level of hours worked compared to the profits earned in the foreign sector.
| Timeperiod | Manufacturing: Domestic and Other Sectors | Manufacturing: Foreign Sectors | Construction (F) | Wholesale and Retail (G) | Transportation and Storage (H) | Accommodation and Food Service Activities (I) | Information and Communication (J) | Financial and Insurance Activities (K) |
|---|---|---|---|---|---|---|---|---|
| 2011 | 43.2854394027824 | 18.3920016690616 | 100 | 59.8738755527855 | 68.8160076528803 | 98.3047609661706 | 30.1248226272917 | 40.7286940588698 |
| 2012 | 40.6629440485378 | 18.1142794118495 | 100 | 59.2576347860258 | 66.426020578943 | 93.8257844311683 | 28.6152006916881 | 44.5719853230866 |
| 2013 | 39.0860008409682 | 19.4407733981836 | 92.0412993979763 | 56.6441872284231 | 63.9069697386353 | 88.7081717210491 | 28.3616996623191 | 49.525679340044 |
| 2014 | 37.071581772029 | 19.7902964782996 | 78.0856540180119 | 55.9667506780926 | 59.942132255157 | 86.7262133233244 | 27.7507387356202 | 48.922677796315 |
| 2015 | 35.5497828152871 | 13.0305946674795 | 72.3176571557281 | 56.7774695675813 | 57.5786967638255 | 85.342297572367 | 25.7509733796161 | 44.8338443964069 |
| 2016 | 36.2239599977337 | 7.35639370664608 | 72.6669585207895 | 56.9054343340294 | 57.8540734929267 | 85.0954722563355 | 25.0065916097024 | 44.2503997221489 |
| 2017 | 37.9033740586693 | 7.6118480026307 | 68.3756767856855 | 56.7897884834336 | 58.220739410543 | 83.8549451756302 | 23.8038440771431 | 47.4383787324657 |
| 2018 | 38.4464786445663 | 7.29402637925708 | 64.3459419499911 | 55.3782897954452 | 61.8575763522569 | 80.9557234171487 | 20.9811635358901 | 49.8989801171907 |
| 2019 | 39.2568071644092 | 7.27251459397691 | 64.7271058840515 | 53.7444874982294 | 64.7251527061541 | 81.6084189940942 | 18.3516926913148 | 51.176636333319 |
| 2020 | 40.8644422473993 | 7.14775434656978 | 65.0855889870646 | 52.4927330323609 | 72.7787886835305 | 84.4852995773699 | 16.3614943872815 | 56.5270153450238 |
Get the data: PxStat PIA12
Figure 4.2 illustrates developments in the labour share across several key sectors in the economy. As mentioned earlier in the chapter, the Foreign sector had a low labour share of just 10.3% in 2020. While ICT (16.4%) had a slightly higher labour share, Manufacturing: Foreign had a labour share of just 7.1%. The labour share in both of these foreign-dominated sectors decreased in 2020.
Looking at the Domestic and Other sectors, the labour share increased for almost all of the sectors shown in 2020. Transport (72.8%) and Finance (56.5%) saw the largest increases in the labour share. Accommodation & Food (84.5%) had the largest labour share,reflecting the labour-intensive nature of the sector. As previously stated, profits in domestic sectors were particularly impacted by the COVID-19 pandemic, with the Employee Wage Subsidy Scheme (EWSS) supporting wages in the sector. This support measure led to small increases or prevented decreases in the labour share for many sectors.
| X-axis label | Domestic and Other | Foreign |
|---|---|---|
| Other Service Activities (S) | 94.2508997094093 | 0 |
| Education (P) | 86.1513665574853 | 0 |
| Human Health & Social Work (Q) | 86.1334599382421 | 0 |
| Accommodation & Food Service Activities (I) | 84.4852995773699 | 0 |
| Public Administration & Defence (O) | 80.7070652668889 | 0 |
| Agriculture, Forestry & Fishing (A) | 73.2638725838308 | 0 |
| Transportation & Storage (H) | 72.7787886835305 | 0 |
| Mining & Quarrying (B) | 66.5643312469225 | 0 |
| Construction (F) | 65.0855889870646 | 0 |
| Professional, Scientific & Technical Activities (M) | 60.4507816632277 | 0 |
| Financial & Insurance Activities (K) | 56.5270153450238 | 0 |
| Wholesale & Retail (G) | 52.4927330323609 | 0 |
| Arts, Entertainment & Recreation (R) | 52.0240785500829 | 0 |
| Manufacturing: Domestic & Other Sectors | 40.8644422473993 | 0 |
| Water Supply, Sewerage & Waste Management (E) | 33.2550944821404 | 0 |
| Electricity, Gas & Steam (D) | 31.561246744169 | 0 |
| Administrative & Support Service Activities (N) | 25.2050780470396 | 0 |
| Information & Communication (J) | 0 | 16.3614943872815 |
| Manufacturing: Foreign Sectors | 0 | 7.14775434656978 |
| Real Estate Activities (L) | 5.02623221688335 | 0 |
Get the data: PxStat PIA12
The labour share differed significantly when looking at the sectors within the Irish economy in 2020, with the majority of sectors having a much larger labour share than the total economy labour share of 32.2%. Domestic sectors such as Education, Human Health and Accommodation & Food had the highest labour shares of 84% or above. These sectors have large numbers of employees and are less capital-intensive compared to the rest of the economy.
The sectors with the lowest shares were the foreign-dominated sectors, as well as Real Estate, Administrative & Support Services and Electricity, Gas & Steam. As seen in Chapter Two, these were the most productive sectors in the economy in 2020 in terms of labour productivity. In addition, these were the only sectors with lower labour shares than the total economy. The ICT and Manufacturing: Foreign sectors are particularly noteworthy for their reliance on intangible assets, with intellectual property being the primary asset class for both of these sectors. In the case of Administration & Support Services, much of the capital in the sector is related to aircraft-leasing activities, generating huge profits, and driving down the labour share.
| Compensation of Employees (COE) | Gross Operating Surplus (GOS) | |
| Information and Communication (J) | 9.1644288134926 | 20.4467055607906 |
| Manufacturing: Foreign Sectors | 7.32271232619673 | 16.9214035764344 |
| Human Health and Social Work (Q) | 4.2090271663916 | 7.68821439787242 |
| Electricity, Gas and Steam (D) | 5.18827297809309 | 7.49127098671648 |
| Real Estate Activities (L) | -2.64384344754303 | 7.18001035924127 |
| Water Supply, Sewerage and Waste Management (E) | 2.61774963472642 | 5.57470834314245 |
| Agriculture, Forestry and Fishing (A) | 1.77599338077655 | 4.84845925384552 |
| Public Administration and Defence (O) | 6.62119834285922 | 4.44597822815319 |
| Education (P) | 4.15753745520485 | 2.77198617611972 |
| Professional, Scientific and Technical Activities (M) | 5.09560872271634 | 2.24085763028336 |
| Wholesale and Retail (G) | -2.0863060604636 | -2.33285249163232 |
| Activities of Households as Employers (T) | -20.898488117937 | -4.65882260233735 |
| Construction (F) | -0.705605475453063 | -6.63641525505908 |
| Manufacturing: Domestic and Other Sectors | -1.1074653555162 | -11.1730197315498 |
| Administrative and Support Service Activities (N) | -6.22326541992863 | -15.4922297098122 |
| Financial and Insurance Activities (K) | 4.02443502554082 | -22.0638324374575 |
| Arts, Entertainment and Recreation (R) | -15.4693439449519 | -22.1167630884869 |
| Other Service Activities (S) | -14.0938309127886 | -25.6972569423964 |
| Mining and Quarrying (B) | -7.88932952957579 | -36.7483031919954 |
| Accommodation and Food Service Activities (I) | -37.5997336983689 | -55.2499722786431 |
| Transportation and Storage (H) | -5.95326327692017 | -64.466351994095 |
Get the data: PxStat PIA12
Figure 4.4 shows the sources of changes in the labour share for each sector in 2020 by highlighting growth in the key elements that explain the labour share, namely wages (Compensation of Employees) and profits (Gross Operating Surplus) in current prices. While the COVID-19 pandemic had an effect on all sectors of the economy in 2020, sectors such as Accommodation & Food and Transport were particularly negatively impacted. Accommodation & Food had the largest fall in wages (-37.6%) and the second largest fall in profits (-55.3%), while Transport suffered the worst fall in profits (-64.5%) but a less severe reduction in overall wages (-6%). There were significant falls in wages for other Domestic sectors such as Arts (-15.5%) and Administration and Support Services (-6.2%). There were also significant reductions to profits in Finance (-22%) due to reduced levels of activity in insurance and financial services.
The foreign-dominated sectors of ICT and Manufacturing: Foreign saw the largest positive increases in both wages and profits in 2020. In the ICT sector, wages increased by 9.2%, while profits increased by 20.5%, while in the Manufacturing: Foreign sector, wages increased by 7.3% while profits increased by 17%. As a result, both of these sectors saw decreases in their already extremely low labour shares in 2020.
| X-axis label | European Union - 27 countries | Denmark | Germany | Ireland | Spain | France |
|---|---|---|---|---|---|---|
| 2011 | 52.4215349757839 | 60.6417995782297 | 55.8224456484205 | 50.6184911027588 | 52.3676368722322 | 57.8242361852294 |
| 2012 | 52.7804190200475 | 59.7471823719215 | 56.9191743044854 | 49.3415477405705 | 50.7624383263791 | 58.2488901923667 |
| 2013 | 52.7737410882307 | 59.5286054499718 | 57.1296614598065 | 48.4936962189406 | 50.1390962284224 | 58.3979922530359 |
| 2014 | 52.6722968139441 | 59.2062255054385 | 56.9846318936113 | 47.0200432902079 | 50.3783715925013 | 58.462197039274 |
| 2015 | 52.2250265989352 | 59.3654016203679 | 57.3829729392143 | 40.6336194517242 | 50.3737982501234 | 58.0147763671647 |
| 2016 | 52.475952882086 | 59.2197499025156 | 57.4937385803717 | 36.0502243987906 | 49.8397131458967 | 58.257853855438 |
| 2017 | 52.5156285927658 | 58.6550501933695 | 57.5086088189359 | 36.4247388475651 | 49.7222696974876 | 58.6395579164364 |
| 2018 | 52.9429989158311 | 59.0393664647795 | 58.356662652607 | 35.0556751768569 | 50.1201300490439 | 58.595041322314 |
| 2019 | 53.0177012289901 | 59.1514052959332 | 59.1838592552819 | 33.6467991884663 | 51.0322282785443 | 57.2944618671082 |
| 2020 | 54.1989416069338 | 59.8821458197285 | 60.5794404656295 | 32.1839709947014 | 53.1046624373487 | 58.1549570845536 |
Get the data: Eurostat
The Irish labour share (32%) is compared to a selection of European countries in Figure 4.5 and is far below the EU-27 aggregate (54%) in 2020. Among the countries examined, Ireland had the lowest labour share for much of the period, with the labour share falling significantly in 2015 when significant globalisation events occurred.
While the Irish labour share declined further in 2020, it increased for many other EU countries shown in the chart. Over the period, Germany and Denmark have consistently recorded the highest labour share since 2011, with their results ranging between 56% and 61%. Despite the highly industrialised nature of the German economy, the labour share exceeded 60% in 2020.
The reason for the large disparity between the Irish labour share and the other countries shown was the considerable influence of intangible capital on the Irish economy.
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