Written answers

Thursday, 7 March 2019

Department of Jobs, Enterprise and Innovation

Economic Competitiveness

Photo of Tommy BroughanTommy Broughan (Dublin Bay North, Independent)
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24. To ask the Minister for Jobs, Enterprise and Innovation her views on the productivity of the workforce in view of recent reports expressing widely different estimates of productivity including reports by the OECD and the Central Bank; and if she will make a statement on the matter. [10956/19]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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Productivity measures the efficiency with which an economy transforms inputs (labour and capital) into outputs. As such, productivity is a key factor of national competitiveness. Ultimately, productivity is the main engine of economic growth in the medium to longer run and the main driver of improvements in living standards by determining sustainable wage levels and financing of public services.

The most widely used productivity metric is labour productivity, which is measured as output (e.g. GDP or GVA) per person engaged or output per hour worked.

The OECD published on February 8th new estimates for 2017 showing that the labour productivity of Ireland’s workforce was the highest among advanced countries with output per hour worked of $99.5 (€87).

Following a request by the Irish Times, the Central Statistics Office - CSO (not the Central Bank, as clarified with the Deputy) has released details of their forthcoming study showing that overall labour productivity for Ireland in 2017 was $87.30 (€77), which is relatively close to the OECD results. The small differences arise mainly from the unit of measurement used for comparison purposes.

Unlike the OECD, who only published headline figures for the total economy, the CSO also provided the Irish Times with initial estimates of labour productivity for the Domestic Sector showing that output per hour worked in 2017 was $54.20 (€47.80), which is significantly lower than OECD headline figure of $99.50 (€87). This substantial difference arises from the impact of large foreign-owned multinational corporations on Ireland’s headline figures of labour productivity.

Following recommendations from the National Competitiveness Council, the CSO published in May 2018 “Productivity in Ireland 2016” including separate results for the Domestic and Foreign-dominated sectors.

The CSO report indicated that overall labour productivity increased by 97 % in Ireland over the period 2000-2016. However, labour productivity in the foreign-dominated sector had increased by 342 % compared to just 49 % growth in the Domestic sector.

These CSO results, which will be updated for 2017 in the first half of 2019, illustrate the large productivity differences between both sectors, particularly after the impact that foreign firms had on official statistics in 2015 and thereafter.

Over the past year, my Department staff has published economic research highlighting the increasing productivity gap between the most and least productive firms in Ireland and measuring the impact of large foreign-owned firms to aggregate productivity growth.

My Department with the Department of An Taoiseach is leading on the development of Future Jobs Ireland, which is a new whole of government, multi-annual framework designed with the aim of integrating innovation and resilience into our economy. It will ensure our enterprises and workers are well positioned to adapt to the technological and other transformational changes our economy and society will face in the years ahead. In particular, a Future Jobs pillar on increasing the productivity of Irish SMEs will focus on actions to boost the productivity performance of SMEs including through improving management skills and facilitating linkages between SMEs and multinational firms.

Photo of Billy KelleherBilly Kelleher (Cork North Central, Fianna Fail)
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25. To ask the Minister for Jobs, Enterprise and Innovation the actions being taken to reduce the costs of doing business in Ireland and reverse competitiveness deficiencies; and if she will make a statement on the matter. [11167/19]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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Ireland’s overall competitiveness performance remains positive. Our improved fiscal position and increased cost competitiveness have contributed to Ireland’s improved international competitiveness. This improvement is reflected in a range of metrics, notably economic growth, increased employment, falling unemployment and a strong trade performance. Ireland’s inflation figures are particularly encouraging. In 2018, the inflation rate in Ireland was 0.7%, which was the lowest in the euro area, and the joint lowest in the EU.

Notwithstanding this strong position, addressing Ireland’s cost competitiveness remains a key economic priority for Government. We continue to monitor Ireland's cost base and to analyse the factors that are crucial to improving our cost competitiveness.

The Costs of Doing Business in Ireland 2018 report, published by the National Competitiveness Council on 1 June, found that the cost base for enterprise is internationally competitive across a range of metrics, including the cost of starting a business, communications costs and average income taxes. However, the Council also highlighted that Ireland remains a relatively high cost location and cost pressures are evident in residential property, credit, labour and business services.

A range of initiatives are in train across Departments to enhance our cost competitiveness and productivity, improve the ease of doing business, reduce the administrative burden business face and drive greater efficiencies across the enterprise base.

Through the Action Plan for Education and Pathways to Work, the Government is working to ensure the pipeline of talent can meet the demand for labour to reduce labour cost pressure. The ongoing work of the Personal Injuries Commission, the implementation of the report on the cost of motor insurance, and the complementary work of the cost of insurance working group should help to reduce insurance costs for businesses.

Rebuilding Ireland – the Action Plan for Housing and Homelessness - presents a wide-ranging set of commitments to address housing supply and, while many of these will take time, the Government is implementing and driving change.

My Department and the Department of the Taoiseach are also developing Future Jobs Ireland, a cross-government initiative with a strong focus on improving productivity, that will be published shortly. This initiative will propose concrete and ambitious actions to enhance our productivity and competitiveness and will ensure that we are well positioned to adapt to transformational changes the economy will face in the years ahead.


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