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Productivity in Ireland Quarter 2 2023

Domestic labour productivity increased by 2.2% in the second quarter of 2023

Online ISSN: 2811-5929
CSO statistical publication, , 11am
A CSO Frontier Series Output

This publication is categorised as a CSO Frontier Series Output. Particular care must be taken when interpreting the statistics in this release as it may use new methods which are under development and/or data sources which may be incomplete, for example, new administrative data sources. 

Key Findings

  • Labour productivity for the Domestic sector (€55.2 per hour) increased by 2.2% in Quarter 2 (Q2) 2023 compared with the previous quarter.

  • Labour productivity for the Foreign sector (€414.5 per hour) also rose by 2.2%, while Total Economy labour productivity (€105.5 per hour) was up by 2.3%.

  • There were significant increases in labour productivity for Manufacturing (Domestic: 14.4%, Foreign: 5.8%) following reductions in the previous quarter.

  • Multifactor productivity for the Domestic sector grew by 2.4%, while the Foreign sector was up by 3.5%.

  • The level of capital services in the Domestic sector declined by 0.4% in Q2 2023, while Foreign capital services were also down by 1.2%.

Statistician's Comment

The Central Statistics Office (CSO) has today (11 October 2023) published Productivity in Ireland Q2 2023.

Commenting on the results, Seán O’Boyle, Statistician in the National Accounts Analysis & Globalisation Division, said: “Productivity across the economy increased in the second quarter of 2023. Labour productivity for the Domestic1 sector rose by 2.2% when compared with the previous quarter, while there was also an increase of 2.2% for the Foreign sector.

These results represent the second release in a new series of productivity statistics by the CSO, which will now be published each quarter shortly after the publication of the Quarterly National Accounts. While movements in productivity should generally be viewed over a longer time-period, these results provide the most up-to-date picture on productivity in the Irish economy to keep policymakers, economists and the wider public as informed as possible. Due to the significant influence of the Foreign sector on productivity measures for the total economy, this release prioritises the Domestic sector for both presentational and analytical purposes. However, more detailed data on all sectors can be found on PxStat.

Labour Productivity

Labour productivity measures the amount of output per hour worked in a sector, so the growth in productivity for Q2 2023 indicates that the economy became more efficient compared with the previous quarter. There were increases in labour productivity for sectors such as Manufacturing (Domestic: 14.4%, Foreign: 5.8%), Professional, Scientific & Technical Activities (5.1%) and Financial & Insurance Activities (3.5%). Several Domestic sectors saw reductions in labour productivity in Q2 2023 such as Transportation & Storage (-7.1%), Construction (-4.1%) and Accommodation & Food (-3.8%).

Multifactor Productivity

Multifactor productivity (MFP), a more detailed measure of overall productivity that considers labour, capital and additional factors such as education, skills, organisational practices and changes in technology, grew by 2.8% for the Total Economy in Q2 2023. Domestic sector MFP was up by 2.4%, while Foreign sector MFP also rose by 3.5%.

1 It should be noted that the Foreign and Domestic classifications in this release differ slightly from those used elsewhere the CSO’s National Accounts. Rental & Leasing Services (NACE 77) is classified as Foreign MNE-dominated in this release due to the concentration of foreign-owned capital in the sector.

Labour Productivity

Labour productivity is a key indicator for the Irish economy as it is the main measure of the efficiency of the labour force. Labour productivity is measured as output per hour worked, where output is measured as Gross Value Added (GVA). Changes in labour productivity for a sector can also be explained by factors other than GVA and hours worked, such as the level of capital and multifactor productivity (MFP) growth, all of which are presented below.

TimeperiodDomestic SectorForeign SectorTotal Economy
2019 - Q150.4306.979.6
2019 - Q250.633183.7
2019 - Q351.3317.684.6
2019 - Q451.3336.585.5
2020 - Q153369.791.3
2020 - Q258.5363.8107.8
2020 - Q351.7392.396.9
2020 - Q454.1371.798.4
2021 - Q158.5396.3110.7
2021 - Q254.4406.5104.4
2021 - Q351.9440.3104.1
2021 - Q453.4394.2102.1
2022 - Q153.4401.6103.8
2022 - Q252.9416.4103.4
2022 - Q353.4462.8110.7
2022 - Q453.8470.9109.8
2023 - Q154405.7103.2
2023 - Q255.2414.5105.5

Get the data: PxStat PIQ02

Labour productivity for the total economy (€105.5 per hour2) grew by 2.3% in the second quarter of 2023, due to the 2.3% increase in GVA compared to the previous quarter. This increase in GVA was largely due to activity in the Manufacturing - Foreign sector, where GVA grew by 3%, having fallen by 16.6% in the previous quarter. Labour productivity increased in both the Domestic sector (€55.2 per hour, +2.2%) and Foreign sector (€414.5 per hour, +2.2%) compared to the previous quarter.

2 All results presented in this release are seasonally-adjusted unless otherwise stated.

TimeperiodLabour ProductivityGross Value AddedHours Worked
2019 - Q101.41.4
2019 - Q20.4-0.1-0.5
2019 - Q31.51.1-0.4
2019 - Q4-
2020 - Q13.40.2-3.3
2020 - Q29.8-18.4-28.2
2020 - Q3-12.411.423.8
2020 - Q44.61.1-3.4
2021 - Q17.81.3-6.5
2021 - Q2-7.22.810
2021 - Q3-
2021 - Q432.8-0.2
2022 - Q1-
2022 - Q2-0.82.13
2022 - Q30.9-0.1-1
2022 - Q40.71.91.2
2023 - Q10.41.41.1
2023 - Q22.22.20

Get the data: PxStat PIQ02

Domestic labour productivity grew by 2.2% in the second quarter of 2023 when compared to the previous quarter. GVA increased by 2.2%, while there was almost no change in hours worked. The increase in Domestic GVA was due to growth in sectors such as Professional, Scientific & Technical Activities (7.5%) and Manufacturing – Domestic (4.9%).

While total Domestic hours worked saw no change in Q2 2023 when compared to Q1 2023, there were changes to hours worked within the sector. There were increases in hours worked for sectors such as Transportation & Storage (3%), Construction (1.9%) and Wholesale & Retail (1.7%). This growth was offset by decreases in hours worked for Manufacturing – Domestic (-9.5%) and Accommodation & Food (-1.2%), leading to the net zero change in hours worked for the quarter.

DescriptionReallocation EffectProductivity EffectContribution
Domestic Sector-3.8326.0422.21
Professional, Scientific & Technical Activities (M)0.4370.5360.973
Transportation & Storage (H)1.137-0.2590.878
ICT and Administrative & Support Services - Domestic0.43-0.090.341
Manufacturing - Domestic-0.9941.3190.325
Accommodation & Food Service Activities (I)0.34-0.1450.196
Wholesale & Retail (G)-0.0290.1210.092
Financial & Insurance Activities (K)-0.2340.310.076
Arts, Entertainment & Other Services (R-T)0.036-0.0050.031
Agriculture, Forestry & Fishing (A)-0.2340.2370.003
Mining & Quarrying (B)-0.1060.083-0.023
Construction (F)0.124-0.223-0.099
Public Administration, Education & Health (O-Q)-0.1850.084-0.101
Real Estate Activities (L)-4.0533.842-0.21
Energy & Water (D-E)-0.5020.231-0.271

Get the data: PxStat PIQ04

Labour productivity growth for the Domestic sector can be broken down into the contributions of each of its subsectors3, as shown in Figure 1.3. The contribution of each subsector is determined by two factors: labour productivity growth for the individual subsector (Productivity Effect) and changes in the relative size of the subsector compared to the total Domestic sector (Reallocation Effect). Positive labour productivity growth for a subsector will always lead to a positive Productivity Effect, however the Reallocation Effect depends on how productive the subsector is compared to the overall Domestic sector. For example, if a low productivity subsector grows faster than the rest of the Domestic sector, it will account for a larger share and therefore reduce average labour productivity for the sector.

The 2.2% quarter-on-quarter increase in Domestic labour productivity can be explained by a Productivity Effect of 6% and a Reallocation Effect of -3.8%. This means that improvements in subsector productivity (Productivity Effect) had a larger impact than changes in the composition of the sector (Reallocation Effect) on Domestic labour productivity growth for the quarter.

Professional, Scientific & Technical Activities (1%) and Transportation & Storage (0.9%) made the most significant contributions to the 2.2% increase in Domestic labour productivity. Most other sectors made a small or negligible contribution.

Real Estate had the largest influence on the Productivity and Reallocation Effects for the quarter, with a Productivity Effect of 3.8% and a Reallocation Effect of -4.1%. In the context of productivity analysis, results for the Real Estate sector are not meaningful due to the relatively low level of labour in the sector and the influence of imputed rent4 on its output.

3 For confidentiality purposes, the contributions of Information & Communications – Domestic and Administrative & Support Services – Domestic have been combined in Figure 1.3.

4 Imputed rent represents the rent that homeowners would pay if they rented their homes rather than owning them.

Capital Deepening and Multifactor Productivity

While changes in the level of labour in the economy are a crucial factor in explaining changes in efficiency in the economy, it is important to remember that overall productivity is not only dependent on labour. Capital, such as machinery and equipment, factories and vehicles (tangible capital) and intellectual property (intangible capital) is the other key element of production in any economy.

Changes in the level of capital available to labour (capital deepening) has a considerable influence on output, as more capital investment increases the productive capacity of workers. Capital deepening is measured as the change in capital services per hour worked, where capital services are units of capital in the same way that hours worked are units of labour.

Aside from the level of labour and capital, overall productivity is also influenced by factors such as education, skills, organisational practices and changes in technology among others, all of which have a significant influence on the quality of labour and capital. Multifactor productivity (MFP) is the measure of overall productivity in the economy, which attempts to capture all of these features.

TimeperiodLabour ContributionCapital ContributionMultifactor ProductivityGross Value Added
2019 - Q10.
2019 - Q2-0.30.4-0.2-0.1
2019 - Q3-
2019 - Q40.70.401.2
2020 - Q1-1.8020.2
2020 - Q2-15.6-0.1-2.8-18.4
2020 - Q312.8-0.1-1.311.4
2020 - Q4-1.9-
2021 - Q1-
2021 - Q25.40.1-2.82.8
2021 - Q330-2.30.8
2021 - Q4-
2022 - Q10.9-
2022 - Q21.60.602.1
2022 - Q3-
2022 - Q40.
2023 - Q10.61.6-0.71.4
2023 - Q20-

Get the data: PxStat PIQ02

Figure 1.4 shows the contributions of labour, capital and MFP growth to Gross Value Added (GVA) quarter-on-quarter growth for the Domestic sector. GVA growth is explained by the contributions of labour and capital, where the contributions capture changes in both of these factors. MFP growth is calculated as the difference between GVA growth and the sum of the labour and capital contributions.

Domestic GVA grew by 2.2% in the second quarter of 2023, almost entirely explained by MFP growth of 2.4%, with virtually no labour contribution and a capital contribution of -0.2%. The negative capital contribution for Q2 2023 does not imply zero investment, but it does mean that the overall level of capital in the sector has reduced compared to the previous quarter, due to depreciation and disposal of assets.

TimeperiodCapital DeepeningMultifactor ProductivityLabour Productivity
2019 - Q1-0.50.50
2019 - Q20.6-0.20.4
2019 - Q30.50.91.5
2019 - Q4-0.10-0.1
2020 - Q11.423.4
2020 - Q212.6-2.89.8
2020 - Q3-11.1-1.3-12.4
2020 - Q41.53.14.6
2021 - Q13.34.67.8
2021 - Q2-4.5-2.8-7.2
2021 - Q3-2.5-2.3-4.8
2021 - Q40.12.93
2022 - Q1-0.90.8-0.1
2022 - Q2-0.80-0.8
2022 - Q30.90.10.9
2022 - Q4-
2023 - Q11.1-0.70.4
2023 - Q2-

Get the data: PxStat PIQ02

Labour productivity growth can also be explained by the contribution of capital deepening and MFP growth. Domestic labour productivity grew by 2.2% in Q2 2023 compared to the previous quarter, due to positive MFP growth (2.4%) and negative capital deepening (-0.2%). Capital deepening is influenced by both the level of labour and capital, and so low capital deepening (as in 2022Q4) does not mean that there was little investment in capital, it instead means that the level of labour grew at the same rate as the increase in capital.

The significant rise and fall in capital deepening in Q2 2020 and Q3 2020 were due to movement in hours worked rather than changes in capital. As hours worked fell with almost no change to capital, there was relatively more capital available to each worker, leading to positive capital deepening in Q2 2020. When hours worked rebounded in the subsequent quarter, there was an opposite effect, resulting in negative capital deepening.

TimeperiodTotal EconomyDomestic SectorForeign Sector
2019 - Q197.2100.593.5
2019 - Q2101.8100.4103.6
2019 - Q3100.1101.397
2019 - Q497.9101.490.6
2020 - Q1100.6103.492.9
2020 - Q299100.691.8
2020 - Q3103.199.399.9
2020 - Q4102.8102.496.5
2021 - Q1112.4107.2110.3
2021 - Q2113.5104.3115.6
2021 - Q3117.5101.9126.1
2021 - Q4116104.9120.4
2022 - Q1120.1105.8127.6
2022 - Q2121.4105.8131.1
2022 - Q3129105.8146.5
2022 - Q4129106.7147.4
2023 - Q1121105.9134.2
2023 - Q2124.5108.5138.9

Get the data: PxStat PIQ02

Figure 1.6 illustrates the evolution of MFP for the Total Economy and Domestic and Foreign sectors since the start of 2019. There was positive MFP growth for the Total Economy (2.8%), Domestic sector (2.4%) and Foreign sector (3.5%) in Q2 2023. MFP in the Domestic sector has grown by 8.2% since the start of 2019. Due to globalisation events, the Foreign sector has seen MFP increase by 32.9% over the same period, resulting in Total Economy MFP growth of 21.9%.

International Comparisons

TimeperiodIreland - TotalIreland - DomesticEU AverageCzechiaFranceLuxembourgSpain
2019 - Q179.650.438.222.352.188.834.1
2019 - Q283.750.638.422.652.289.534.4
2019 - Q384.651.338.52352.189.534.5
2019 - Q485.551.338.623.151.989.934.5
2020 - Q191.35338.923.651.291.134.5
2020 - Q2107.858.53922.954.199.236.3
2020 - Q396.951.738.922.752.19033.6
2020 - Q498.454.139.124.453.189.733.4
2021 - Q1110.758.539.223.652.694.934.2
2021 - Q2104.454.438.723.552.192.533.1
2021 - Q3104.151.939.223.450.990.734.1
2021 - Q4102.153.439.223.450.691.834.6
2022 - Q1103.853.439.22350.891.634.3
2022 - Q2103.452.939.323.150.491.534.3
2022 - Q3110.753.439.52350.491.334.8
2022 - Q4109.853.839.322.850.289.235.2
2023 - Q1103.25441.226.151.891.736.8
2023 - Q2105.555.241.225.951.996.136.5

Get the data: PxStat PIQ02 (CSO); NAMQ_10_A10 and NAMQ_10_A10_E (Eurostat)

Figure 1.7 compares labour productivity for Ireland’s Total Economy and Domestic sector to the EU average and several countries in the EU5. Ireland had the highest labour productivity (€105.5 per hour) in the EU in Q2 2023, above Luxembourg (€96.1 per hour) and over two-and-a-half times above the EU average (€41.2 per hour). Domestic labour productivity (€55.2 per hour) was also considerably above average, and higher than all countries shown other than Luxembourg. Labour productivity growth was flat across the EU in the second quarter of 2023, while labour productivity  in Ireland increased for both the Total Economy (2.3%) and Domestic sector (2.2%).

5 For which data was available at the time of release.

Table 1.1: Labour Productivity by Sector (Euro per Hour)
Table 1.2: Labour Productivity by Sector (Euro per Hour) (Seasonally-Adjusted)
Table 1.3: Labour Productivity Growth by Sector (%) (Quarter-on-Quarter, Seasonally-Adjusted)
Table 1.4: Sector Contributions to Domestic Labour Productivity Growth (%) (Quarter-on-Quarter, Seasonally-Adjusted)
Table 1.5: Sector Contributions to Total Economy Labour Productivity Growth (%) (Quarter-on-Quarter, Seasonally-Adjusted)
Table 1.6: Labour Share of Gross Value Added (%) (Seasonally-Adjusted)
Table 1.7: Multifactor Productivity Growth (%) (Quarter-on-Quarter, Seasonally-Adjusted)