Irish workers among the least productive in Europe, study indicates

Irish workers are among the least productive in Europe, a new study has indicated, contrary to previous reports.

The research, jointly carried out by the Nevin Economic Research Institute (Neri) and trade union Siptu, showed the average “value-added per hour worked” by domestic workers here between 2017 and 2019 was €28.

That figure, which excludes the value-add of workers in foreign-owned enterprises – considered distortionary – ranked Ireland and Irish workers last among a group of eight comparator countries in Europe behind Luxembourg, Denmark, Norway, Belgium, Austria, Netherlands, Finland and Sweden.

These eight countries are small, open, advanced economies and are viewed by the Irish Government as economic peers.

The €28 per hour figure was 16 per cent below the average (€32.4) and 57 per cent below the top-ranked country Luxembourg whose average value-added per hour worked was €43.9.

“These are significant deficits,” said co-author Michael Taft, who presented the study’s preliminary findings at the annual Neri labour market conference in Maynooth University on Thursday.

“In 2019, increasing productivity by 16 per cent in the domestic market economy would be equivalent to a €10 billion rise in value-added in the domestic sector. This increase would be divided between wages and profits,” he said.

Mr Taft said the study, which utilised Eurostat data on productivity, focused on the domestic Irish market economy because that was where most people worked.

He noted that sectors such as manufacturing, wholesale and retail, and hospitality were even further behind their European counterparts. It was only in the professional and scientific sector which includes management consultancy that Irish workers ranked above the average.

Mr Taft said that although he and his co-author Christ Smart of Neri had not yet interpreted the data, Ireland’s poor productivity rating might be caused by variety of issues including lack of investment; fragmentation and lack of scale; managerial deficits, higher input costs and even lower levels of employee voices at management level.

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

Ireland typically scores highly in the productivity charts because of the preponderance of multinationals and the huge value-add associated with certain multinational products such as Apple’s iPhones. However, critics claim multinationals, because of their complex supply chains, falsely inflate Ireland’s productivity rating.

Also attending the conference was Trinity College Dublin academic Alan Eustace, who spoke about the incoming EU directive on adequate minimum wages, which is due to be transposed into Irish law later this year. Mr Eustace said although Ireland was on the way to achieving the directive’s aim in ensuring minimum wage rages equate to 60 per cent of median wage rates, the bigger potential impact related to collective bargaining.

The directive seeks to impose an obligation on member states to ensure that collective bargaining wage agreements cover up to 80 per cent of the workforce. Currently in Ireland the rate is just 35 per cent, Mr Eustace said.

Attendees also heard from Niamh Garvey of the National Economic and Social Council, who spoke about the need for a just transition in agriculture based not simply on “what emission reduction targets should be”, or solely on what climate mitigation measures should be adopted, but on “how to achieve targets in a way that is socially inclusive, economically viable and environmentally sustainable”.