Irish workers rank high in report

IRISH WORKERS were among the most productive in the world last year, a new report by Forfás and the National Competitiveness Council finds, but more needs to be done to boost productivity further, thereby enhancing competitiveness.

The report urges the Government to avoid cutting spending on education, training and critical infrastructure “to the greatest possible extent”, but says the use of robust cost/benefit analyses of expenditure lines are essential in the prioritisation process at a time of very limited resources.

Ireland’s Productivity Performance 1980-2011, published today, stresses the importance of high-quality broadband connectivity in driving growth, innovation, public sector efficiency and regional development.

It notes that output by a worker for each hour worked stood at €39 in 2011. In real terms – ie adjusted for inflation – output from each worker has tripled over the past three decades.

In 1980, the report notes, Irish workers were relatively unproductive compared to their peers internationally. They have since become more productive than those in most other countries.

Sectorally, the report shows a spectacular increase in productivity among workers in the food processing sector. Output by each worker for each hour almost doubled in the decade to 2007 (the most recent year for which figures are presented), reaching more than €65 an hour.

This is far above the EU average and considerably ahead of Denmark, which has long been a model for food producers globally.

Productivity in the chemicals and pharmaceutical sector is exceptional. According to the report, output by a worker for each hour in Ireland stood at €155 in 2007, three times the EU average and double the US average.

“Up to one third of Ireland’s labour productivity growth since 2007 has arisen as a result of a reduction in hours worked,” the report states.

A very large decline in hours worked in the construction sector, which is traditionally a less productive sector explains much of this. An increase in productivity is one of the two drivers of competitiveness. The other is cost containment.

A separate report published yesterday by the McKinsey Global Institute, an arm of a firm of management consultants, echoed the Forfás/NCC report, saying governments should “continue to invest in education, infrastructure and innovation”.

On export performance, it says Ireland had the “largest trade surplus relative to GDP in knowledge-intensive manufacturing (21.6 per cent of GDP) in our sample of mature economies in 2008”.

It goes on to note, however, that care is needed in interpreting Irish data because “the country is exposed to various complex tax optimisation strategies of multinational companies”.