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Labour Productivity by Domestic/Foreign Ownership

Labour Productivity by Domestic/Foreign Classification

Irish firms were less productive than foreign-owned firms in almost all sectors in 2021

Online ISSN: 2811-5910
CSO statistical publication, , 11am
COVID-19 Release Information

This release was compiled during the COVID-19 crisis. The results contained in this release reflect some of the economic impacts of the COVID-19 situation. The full series of information notes on the implications of COVID-19 on the National Accounts can be found on our Information Notes page.

The section below, which is a new addition to the publication, provides a breakdown of labour productivity by Foreign and Domestic ownership. Throughout this publication the Foreign and Domestic designations are based on the dominance criteria1 as applied in the Annual National Accounts. However, in this chapter the labels Foreign and Domestic refer to ownership within sectors. The criteria used to determine ownership is whether the immediate owner is a foreign or domestic company.

The estimates shown in this chapter should be considered as experimental. Labour productivity is presented here as Gross Value Added (GVA) per Employee, due to the absence of data on hours worked by Foreign and Domestic ownership. Additionally, in this section the focus is on the levels of labour productivity, expressed as GVA per Employee rather than on growth rates, on account of increased volatility in the growth rate based estimates at a more granular level.

To ensure comparability between the Foreign and Domestic-dominated and Foreign and Domestic ownership-based data, Figure 6.1 and 6.2 are presented in current prices. Data from Figure 6.3 onwards has been transformed for two reasons. Firstly, the more detailed sectoral data which includes a foreign and domestic split was more volatile and has been smoothed to allow a better interpretation of the results. In addition, the GVA used is in constant prices but is not chain-linked. Chain linking is more suitable when deflating more aggregated macro-economic time series. Instead, a more basic approach to deflation has been followed which uses a previous year’s price approach.

1 See Background Notes.

Table 6.1 Gross Value Added by Foreign and Domestic Ownership (Percentage Share)
NACESectorForeignDomestic
01-03Agriculture, Forestry & Fishing2.297.8
   
10-33Manufacturing94.85.2
10-39Industry (Excluding Mining and Quarrying)91.18.9
of which  
10-12Manufacture of Food Products, Beverages and Tobacco Products76.223.8
13-15Manufacture of Textiles, Wearing Apparel and Leather Products26.173.9
16-18Manufacture of Wood and Straw Products; Printing of Recorded Media23.876.2
19-21, 26Manufacture of Coke and Refined Petroleum Products, Chemicals & Chemical Products, Basic Pharmaceutical Products and Computer, Electronic & Optical Products99.40.6
22-23Manufacture of Rubber, Plastic and Other Non-Metallic Mineral Products46.153.9
24-25Manufacture of Basic Metals and Fabricated Metal Products Except Machinery & Equipment27.472.6
27-28, 31-33Manufacture of Electrical Equipment, Other Machinery & Equipment, Furniture and Other Manufacturing; Repair of Machinery & Equipment83.716.3
29-30Manufacture of Motor Vehicles and Transport Equipment72.127.9
35Electricity, Gas, Steam & Air Conditioning Supply11.688.4
36-39Water Supply; Sewerage, Waste Management & Remediation Activities26.074.0
   
41-98Services48.951.1
of which  
41-43Construction17.382.7
45-47Wholesale & Retail Trade; Repair of Motor Vehicles and Motorcycles50.949.1
49-53Transportation & Storage20.879.2
55-56Accommodation & Food Service Activities10.689.4
58-60, 62-63Software & Computer Programming94.15.9
61Telecommunications84.215.8
64-66Financial & Insurance Activities54.445.6
69-72Legal & Accounting Activities; Activities of Head Offices; Architectural & Engineering Activities; Scientific Research & Development48.651.4
73-75Advertising and Market Research; Other Professional, Scientific and Technical Activities; Veterinary Activities42.157.9
77-82Administrative & Support Service Activities61.438.6
   
01-98Total Economy64.535.5

Table 6.1 provides an overview of the economic sectors presented in this chapter analysed by Foreign and Domestic ownership. Looking at the more aggregated sectors, 98% of GVA in Agriculture consists of domestic companies, while in Industry2 the opposite is true, with 91% of the GVA in the sector comprised of companies that are foreign-owned. The Services sector is evenly split by ownership with 49% Foreign and 51% Domestic.

Within Industry, four out of the ten sectors presented are majority foreign owned at over 70% of GVA in the sector. Of the remaining six sectors, five are predominantly domestic, also all in excess of 70% of the total. The manufacture of Rubber, Plastic and other non-metallic Mineral products is evenly split between Foreign and Domestic ownership.

For Services, ICT and the Financial sector are predominantly foreign, while Construction and the Accommodation & Food sectors are mainly domestic.

2 Industry excludes Mining & Quarrying (NACE 05-09).

X-axis labelManufacturing - Foreign Ownership Manufacturing - Foreign Dominant Sector Services-Foreign OwnershipServices-Foreign Dominant Sector
2013244113.869734537279466.76329138147.390783564175679.564530306
2014262048.0248994298100.271125383152136.358404997194557.076270213
2015640662.002191553830096.386287389170883.381167602225571.376614988
2016574610.440787004770418.142566101173565.345306912229681.018040685
2017590462.302264636701380.43525024191149.016400783270929.343646809
2018644369.743196429706862.011961289217443.129479896335506.446830605
2019676983.445670258741319.723572473235134.076597582409950.491425373
2020719637.369111888802473.060554972249957.405668516456916.710130009
2021774562.621720568827202.002671582274959.433286973485237.025715234

Get the data: PxStat PIA15 (Dominance) and PxStat PIA18 (Ownership)

Figure 6.1 shows a comparison of GVA per Employee using the dominance criteria3, as seen elsewhere in the publication, to the ownership basis as presented in this chapter. The ownership-based Manufacturing Foreign had lower GVA per Employee as it includes activities in traditionally domestic sectors such as Food & Drink and Textiles which are less productive. In addition, the exclusion of the small element of domestic activity in the foreign-dominated sectors also affects the result.

A similar trend is evident in the Services sectors. As ICT is the only foreign-dominated Services sector, it is termed Services foreign-dominated. As Services on an ownership basis includes foreign-owned Services companies across all Services sectors, the levels of productivity are significantly lower at €274,959 in 2021 compared to €485,237.

3 MNE turnover on average exceeds 85% of sector total – See Background Notes.

X-axis labelDomestic - Ownership Domestic - Dominant Sector
201361312.70977698670701.6916728853
201462868.92781039474301.5327134164
201564015.83187950777084.8399321808
201665293.914367578578217.5806375049
201768733.443499934482891.6543918759
201870433.361898590686868.4051754792
201974345.590863790489655.6192612643
202075308.399193148489910.9510601971
202181162.022886079894748.9892476291

Get the data: PxStat PIA15 (Dominance) and PxStat PIA18 (Ownership)

In line with Figure 6.1, Figure 6.2 also illustrates the difference in labour productivity (GVA per employee) across all domestic sectors using the dominance criteria, as seen elsewhere in the publication, to the ownership basis as presented in this chapter. The ownership-based Domestic had lower GVA per Employee as it excludes foreign companies across all the sectors such as Aircraft Leasing, Finance & Insurance, Wholesale & Retail etc. However, the domestic ownership grouping also includes domestic ICT companies and some manufacturing sectors such as Electronic, Pharmaceuticals etc that are excluded from the dominance based one.

X-axis labelAgriculture - ForeignIndustry - ForeignServices - ForeignAgriculture - DomesticIndustry - DomesticServices - Domestic
20136873.37752842878242154.12439585138147.46026468118128.10271849575966.297300903263350.0843899287
20148581.60268904749265998.97130005149152.65373537821982.668199594577824.67069227163256.0865352131
20158216.12866300641615544.82755054164247.52643150622981.025643990476264.118396459763376.4010894378
20167865.74267489269559930.535522163163554.0386819325926.422212390777213.095318000163334.4732119878
20178665.30227352591574353.327152647176591.82463982828687.696276772876173.344998253764016.1185989659
20188185.64300252007640175.533294657198894.71148278730616.35965398281273.709606752864749.7042471224
201915288.0117096922677713.322077714210859.88396699334113.946937385784607.343571705266425.9621472047
202017040.0445356462792582.241778911221932.98732881339950.984977196597425.692406166768505.2200723894
202117701.7437301325898502.423144372237021.44056696342984.7797488331136412.74353553170146.8174481628

Get the data: PxStat PIA18

A comparison of GVA per employee for the aggregated sectors of Agriculture, Industry and Services is presented above at both Foreign and Domestic ownership. Industry - Foreign was over six times more productive than Industry - Domestic, particularly since 2015. Both sectors recorded their highest results in the period in 2021, with GVA per Employee of €898,502 for Foreign owned companies and €136,413 for Domestic companies. In 2021, 98% of GVA within Agriculture was domestic, with GVA per employee of €42,985.

GVA in the Services sector is comprised equally of foreign and domestic companies. Services - Foreign was consistently two to three times more productive over the period than Services - Domestic. In 2021, GVA per employee of €237,021 was reported for all foreign companies in services, while for the domestic companies a result of €70,147 was reported.

In general, foreign-owned companies were more productive than their Domestic equivalents. This is probably because Foreign companies need to reach a level of success or efficiency in their home market before expanding their activities abroad. In the case of domestic firms, companies at all levels of development are included.

X-axis label ForeignDomestic
Chemicals, Pharmaceutical and Computer, Electronic & Optical Products (19-21,26)1524859.3710669121127.362447134
Software & Computer Programming (58-60,62-63)907135.376511192106727.1537916381
Administrative & Support Service Activities (77-82)261268.116129238129785.054600021
Electrical Equipment, Furniture and Other Manufacturing (27-28, 31-33)172836.29567224982670.3920085311

Get the data: PxStat PIA18

Figure 6.4 compares labour productivity between foreign and domestic companies in the most productive sectors in the economy.  The graph highlights that foreign companies are far more productive than the domestic companies in these sectors. For example, productivity for foreign companies in Software & Computer Programming (58-60, 62-63) was €907,135 per employee in 2021 compared to €106,727 per employee for domestic companies. For Admin & Support services which includes Aircraft Leasing, domestic companies reported GVA per Employee of €129,785 compared to €261,268 for foreign companies.

Although these sectors have a high concentration of MNE activity, there are significant domestic activities associated with them. Many of these domestic companies are also significant employers. For example, domestic companies in Software & Computer Programming account for 35% of employment in the sector.

Despite the difference in productivity levels between foreign and domestic companies in these sectors, the domestic parts of these sectors are highly productive compared to other domestic sectors in the economy.

X-axis label ForeignDomestic
Food Products & Beverages (10-12)295326.33031580362776.2127076978
Rubber & Plastic Products (22-23)214373.255399359115912.393242681
Water Supply; Sewerage & Waste Management (36-39)163823.22381035894646.193664707
Metals & Metal Products (24-25)84180.359526452260577.2842149015
Motor Vehicles & Transport Equipment (29-30)59867.233196366424110.355181339
Wood, Straw & Printing of Recorded Media (16-18)53672.079147825367873.0108376419
Textiles & Leather Products (13-15)42756.294342493527291.2899505596

Get the data: PxStat PIA18

Figure 6.5 compares labour productivity between foreign and domestic companies for the other Industry sectors.  Foreign companies are more productive than domestic companies for the majority of these sectors, however on a smaller scale than in Figure 6.4. In most cases the domestic companies account for the majority of employment in the sectors, so the high productivity results for the foreign sector are sometimes explained by a small number of highly profitable companies. 

In the case of Food & Beverages, foreign companies were almost five times more productive. The foreign companies explain almost 40% of employment in the sector and are generating very significant profits.

The only sector where domestic companies (€67,873 per Employee) were more productive than foreign companies (€53,672 per Employee) was in the production of Wood Products and Recorded Media. Domestic companies accounted for over 70% of both employment and GVA in the sector.

X-axis label ForeignDomestic
Professional, Scientific & Technical Activities (69-72)188399.23648175389776.278386899
Financial & Insurance Activities (64-66)152981.317262864129947.306701878
Wholesale & Retail Trade (45-47)128609.3071202758309.3974881563
Construction (41-43)77736.22142999551247.3787781626
Transportation & Storage (49-53)53501.404519140658275.1138795672
Accommodation & Food Services (55-56)13636.353761635314549.3052248921

Get the data: PxStat PIA18

Figure 6.6 compares labour productivity between foreign and domestic companies for the other Services sectors. In many of the sectors, domestic productivity is closer to the Foreign result. Productivity in both foreign (€152,981) and domestic companies (€129,947) in the Financial & Insurance sector was relatively similar in 2021, compared to other sectors. At the same time, employment in the sector was evenly split.

Some of these sectors were the most adversely affected by COVID-19 such as Accommodation & Food and Transportation & Storage. Nevertheless, labour productivity for foreign and domestic companies in these two sectors was almost identical in 2021. In contrast, foreign companies in Wholesale and Retail were twice as productive as domestic companies. This sector is one of the biggest employers in the economy, employing over 300,000 people. The Foreign sector accounts for half of the GVA but only employs a third of the workforce.