EconomyCantillon

Irish productivity myth debunked

New study ranks State down the bottom of eight-country league table in terms of productivity

The inclusion of multinationals in our productivity stats was always going to lead to a faulty perception.. Photograph: iStock

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Sun May 19 2024 - 06:15

We’ve been dining out for a long time on the notion that we have one of the most productive workforces in the world. According to the Central Statistics Office (CSO), Irish workers generated an impressive €97 worth of value for every hour they worked in 2023. That put us at the top of the Organisation for Economic Co-operation and Development’s 36-strong list of advanced economies. The figure was also more than twice the EU average.

But there was always something fishy about this finding. It was almost entirely predicated on the presence of high-value multinationals in the Irish economy. Labour productivity in the multinational-dominated foreign sector, as distinct from the domestic economy, was a whopping €381 per hour in 2023, according to CSO.

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So an hour spent working for Apple generates almost €400 worth of value (probably a lot more, the figures aren’t broken down on a company-by-company basis). This is because the US tech giant produces extremely valuable and highly sought-after iPhones, which cost up to $1,500 (€1,426) and it has a complex supply chain across multiple low-cost jurisdictions to extract the maximum value from its production process.

The inclusion of these companies in our productivity stats was always going to lead to a faulty perception. The bubble was burst during the week when new research, presented at an event hosted by Nevin Economic Research Institute, revealed that Irish workers — those in the domestic economy where the majority work — were among the least productive in Europe.

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The study showed the average “value-added per hour worked” by domestic workers here between 2017 and 2019 was just €28, ranking Irish workers last in a group of eight comparator countries in Europe behind Luxembourg, Denmark, Norway, Belgium, Austria, Netherlands, Finland and Sweden.

The €28 per hour figure was 16 per cent below the average (€32.4) and 57 per cent below the top-ranked country Luxembourg.

The findings suggest that despite the strong presence of multinationals, known for high levels of research and development and investment in general (the perfect ingredients for boosting productivity), this hasn’t translated across to the domestic economy as many would have hoped.

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