Dr. Tom McDonnell:

I can answer that directly. Broadly speaking, productivity growth in the West has been between 1% and 1.5% since World War II. It has deteriorated in the last ten to 20 years, however, because of the changing composition of the economy. Ireland's productivity growth was higher than other countries in the West up to about 2007 and 2008. There was a major catch-up effect associated with that. As the Organisation for Economic Co-operation and Development, OECD, says, there is now marginal scope for productivity catch-up, although it says there is some scope for higher labour resource utilisation, which I discussed earlier. What we have seen in the last couple of years is that, allegedly, Irish productivity has exploded. However, it has exploded in regard to the onshoring of intellectual capital.

That means that when one looks at unit labour costs in Ireland, they have come down dramatically across the economy vis-à-visother European states. However, it is a chimera, essentially, and unfortunately the headline unit labour cost statistics are now broken in Ireland. What I can say, however, is that the labour cost index has only increased by 3.1% in Ireland since 2012, and has increased by about 20% in Germany and the Netherlands. Ireland is now in the top one third of Organisation of Economic Co-operation and Development, OECD, countries for productivity. That means we are a high-productivity economy. That means there is limited scope for catch-up with the United States in management best practice and so on. What it means, however, is that if one wants productivity gains in the future, and that is not to say that we should not continue to pursue those, it will have to be based upon having a robust innovation system whereby we are generating new ideas ourselves, and putting them into practice in new businesses, whether they are high-potential startups rolling out of the universities, or something different. Unfortunately, we know that the technology diffusion mechanism in Ireland, as in other western European countries, has now broken down. We are seeing productivity growth in the multi-nationals, but they are locking that up through a system of patents. We are not seeing productivity gains in small and medium enterprises, whether in Ireland, other European countries or, indeed, America. It is not specifically an Irish problem. It is now an international problem. There are things that one can do, but broadly, we have not been doing well on productivity from small and medium enterprises in the West in the last ten years.