Mr. Seamus Coffey:

I thank the Senator for bringing up the issue of the wage share. There is no doubt that in Ireland the wage share is very low. If we consider the value added created by companies in the business economy - taking away the financial sector in which there are problems and the sectors dominated by the public sector - health, education and defence - across the European Union the wage share is 60%. In other words, 60% of the value of companies created across the European Union goes to workers. In Ireland the rate is 42%. Therefore, the wage share is very low.

In the case of Ireland, there are unusual features such as from where does the value come. We have two economies. Ireland is the only economy in the European Union in which foreign-owned companies create more value than domestically-owned companies. The value added by the foreign-owned sector is larger than that added by the domestic sector. Ireland is unique in that regard. In the foreign-owned sector the wage share is 26%. That is unusual; it is not seen anywhere else in the world. Part of the reason is the type of sector in which these companies are involved, for example, pharmaceuticals, in which high value is added. I imagine some of it is down to taxation, the location of profits and operating in a low tax environment.

The sector that creates the most value added is very low at 26%. If one looks at Irish-owned companies, the wage share is 65%. For domestically-owned companies, Ireland's wage share is above the EU average, which is 63%. At an aggregate level, the wage in Ireland appears low but one should split it into the foreign-owned sector where the wage share is much lower. The foreign-owned sector, paradoxically, is the high paying sector where more people have higher paying work. If one takes the domestically-owned sector, the wage here is 65%, which is not the highest by any means but it is close to the EU average. Looking at the labour share, or the wage share, we have the complication of Ireland having two separate economies.