On paper at least, Irish workers are the most productive on the planet, generating an impressive €105 worth of value for every hour they worked in the second quarter of 2023. That’s according to figures produced by the Central Statistics Office (CSO) in recent days.
That puts us at the top of the OECD’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.
Before you wonder what in our genes makes us the most efficient, energetic, get-up-and-go employees ever to frequent a workplace, let me take some air out of the balloon.
Productivity is one of those indeterminate concepts, which means different things depending on the person or the circumstance. One person’s notion of a productive day is another’s idea of a misspent 9-5.
The baristas in a coffee shop at Dublin Airport, who on a given morning produce a coffee literally every 60 seconds for hundreds of bleary-eyed, time-starved passengers, surely meet any casual definition of what it means to be productive.
However, in the dry, arid realm of economics, there’s a more precise definition that has little to do with the efficiency levels of a given employee or workforce and more to do with value of the product being produced.
According to the CSO, labour productivity in the multinational-dominated foreign sector, as distinct from the Irish economy as a whole, was a whopping €414 per hour in the second quarter.
So an hour spent working for Apple generates more than €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 firm produces extremely valuable and highly sought-after iPhones, which cost up to $1,500 (€1,426). It also has a streamlined production process across multiple low-cost jurisdictions to extract the maximum value from its manufacturing line.
So no matter how productive our aforementioned baristas are they won’t generate the same sort of “value-add” while making €3 coffees. Put another way, a sloucher in Apple will always be more productive than a highly-efficient, workaholic coffee shop attendant.
To burst the bubble a little further, labour productivity in the domestic sector here was just €55 per hour in the second quarter, half the national rate and a fraction of the multinational one.
The €55 figure puts Irish workers, at least those who don’t work for big multinationals, more in line with their international counterparts, above the EU average but below many peer countries.
This is not to say that workers in domestic firms here are slackers, far from it, multinational firms constantly highlight the skilled labour force here as one of the chief enticements, but productivity – in economic textbook terms – has a lot more to do with what a given economy or state produces rather than the work ethic of its labour force.
So as a high-tech and big pharma hub, Ireland will naturally rank highly in the productivity charts whereas a country trading predominantly in traditional foodstuffs or tourism will rank lower.
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.
Productivity as an economic concept tends to have little traction with the wider public and yet it is the chief driver of wages and living standards in an economy.
As US economist Paul Krugman says, “productivity isn’t everything, but, in the long run, it is almost everything”.
“A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker,” he says.
Despite the fact that we’re living in an era 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. Annual productivity growth there has averaged around 0.5 per cent since the crisis compared with over 2 per cent in the years before 2008, leaving Britain lagging most of its G7 peers.
Brexiteers, the economically motivated ones, genuinely believe a nimbler, less taxed, less regulated UK economy, outside the bureaucracy of the EU, could provide the necessary jump-start.
The UK’s so-called “productivity puzzle” has perplexed economists and no one seems to have a clear-cut explanation for the country’s poor performance in this department.
Is it the fact that the new jobs created since the financial crisis are predominantly in low-skilled, low-paid sectors where productivity is limited?
Contrasting levels of research and development (R&D) between foreign and domestic firms in Ireland is natural to a certain extent given multinationals are often where they are – at the top of the food chain – because of advances in technology. However, the expected R&D spill-over into the domestic economy from having these firms here hasn’t really materialised.
The productivity debate gets little air time here as our numbers are inflated by multinationals but in an age riven by populist anti-immigrant politics and growing levels of inequality, it’s an increasingly relevant concept.
