Friday 26 April 2019

Multinationals lead way in productivity

Domestic productivity lags. Stock photo: Getty Images
Domestic productivity lags. Stock photo: Getty Images
Donal O'Donovan

Donal O'Donovan

New data has highlighted the productivity gulf between multinationals and indigenous firms in Ireland. However, with imperfect data, the 'Leprechaun economics' that distorted growth figures in 2015 may have exaggerated the differences.

Ireland's average Labour Productivity Growth has been the fourth-highest in Europe since 2000, but the mainly domestic sector lags well behind, according to the 'Productivity in Ireland 2016' study from the Central Statistics Office.

Labour productivity measures the value of work done in the economy, with higher value added job functions generating the greatest productivity gains.

The report found growth here averaged 4.5pc in the period from 2000 to 2016, but that included a big leap higher in 2015 - the year of the now internationally famous 'Leprechaun' economics when the Irish economy reportedly grew by 26pc in a year.

For the period to the end of 2014 the equivalent growth rate is 3.4pc, the CSO said. That is still almost double the EU average of 1.8pc for the entire period to 2016.

However, within the Irish figures, labour productivity growth among foreign-owned firms averaged 10.9pc over the period to 2016 and averaged 6.2pc to 2014.

Among Irish-owned firms, up until 2016 productivity growth was 2.5pc, or 2.4pc to 2014.

"This clearly illustrates that the impact from the globalisation events of 2015 are concentrated in the 'foreign sector' as there is little change in the results for the 'domestic' and 'other sector' for the two periods," the CSO said.

The globalisation events referred to include the shifting of intellectual capital assets to Ireland in 2015 by large multinationals after tightening of international tax rules. The same factor drove the sharp rise in the overall size of the economy here, as measured using standard gross domestic product methods.

A significant factor in the rise in productivity here has been the stock of capital assets, including intellectual capital in the technology sector amid high-cost, high value added pharma plants.

Ireland's capital stock per employee has increased from €150,000 per employee to €378,000 per employee between 2000 and 2016, an increase of 152pc, the CSO found.

Capital stock per worker for the Foreign sector increased by an average annual growth rate of 6.9pc compared to 3.5pc for domestic firms.

Irish Independent

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