Irish productivity levels inflated by multinationals, CSO figures show

Irish workers are among the most productive in the world, adding on average €103.90 to the value of the economy for every hour they worked in the third quarter of 2023, according to the Central Statistics Office (CSO).

Productivity, defined as the rate at which goods or services are produced in an economy, is a key driver of earnings and prosperity.

The CSO’s headline figure is, however, highly inflated by the multinational-dominated foreign sector. Labour productivity for the foreign sector was €405.90 per hour compared with just €54.40 per hour for the domestic sector.

The mismatch reflects the massive value-add attached to certain multinational products.

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The CSO’s latest figures show productivity across the economy decreased in July, August, and September. Labour productivity for the domestic sector fell by 1.8 per cent when compared with the previous quarter, while the foreign sector was down by 0.5 per cent.

“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,” the CSO said.

The CSO figures showed there were significant reductions in labour productivity for domestic sectors such as domestic manufacturing (-10.6 per cent), financial and insurance activities (-8.5 per cent), and accommodation and food (-5 per cent).

Labour productivity typically measures the value of work done in a given economy over time with higher value-added jobs generating the greatest productivity. Technology and innovation underpin productivity growth and multinationals tend to lead the way in these areas, creating the big value-add jobs that, in turn, generate the greatest productivity gains.

As a high-tech and big pharma hub, the Republic will therefore rank highly in the productivity rankings internationally.

Separate OECD (Organisation for Economic Co-operation and Development) figures, published earlier this year, put Ireland at the top of the organisation’s 36-strong list of advanced economies, ahead of other strong performers such as Luxembourg and ahead of the State’s main trading partners, the US and the UK. The Irish figure was also more than twice the EU average of €41 per hour.

Despite the current era being defined by technological advancement, productivity growth across the world, in both advanced and developing economies, has been sluggish in recent decades. Flagging productivity has been at the core of the UK’s stumbling economic performance since the 2008 financial crisis.

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