What can Ireland teach us about worker productivity?
Ireland has been ranked the world's most productive country. In part, that was achieved by attracting foreign tech and pharma companies.
This story was produced by our colleagues at the BBC.
Think of Ireland and a few key things may come to mind: St. Paddy’s Day, beautiful greenery, a pint of beer. Now, you can add productivity to that list. Ireland has been ranked the most productive country in the world by the Organization for Economic Cooperation and Development.
Now, productivity refers to how much economic output a worker produces in a given period of time, and the U.S. has trailed the historical average. So what makes Ireland different?
Guinness, arguably Ireland’s most famous brand, has been brewed in Dublin since 1759. Since then, some things have changed. The brand is now owned by Diageo, the British drinks giant. And while the recipe is the same, the company is always looking to make efficiencies, noted Aidan Crowe, director of operations at the St. James’s Gate Guinness brewery.
“Technology has allowed us to be dramatically more efficient by making changes to how we manage things like steam usage, electricity usage and so on,” he said.
New technologies are one thing that can boost worker productivity. Here, Diageo makes 3.5 million pints of beer a day — that’s 1.3 billion pints a year. So how much more efficient can it get?
“I think you set goals — maybe five-year, 10-year goals,” Crowe said. “But when you get to those milestones, you suddenly discover that the horizon has moved on.”
At a very different horizon is the office of D4H Technologies — situated in a lighthouse.
“It’s an unusual location,” said Chief Executive Robin Blandford. “We do software for emergency response teams.”
When we talk about productivity, we’re also talking about people. Despite D4H’s picturesque surroundings, the pandemic forced staff work to remotely. Now, D4H hires people across seven countries. The challenge is to make sure the team delivers while they’re spread out.
“Productivity, to me, is when we’re all pulling in the same direction,” Blandford said. “As we’ve become distributed, what we’ve asked people to do is become part of their communities. Stop letting your workplace pick your friends.”
Because productivity is how much value a worker adds to what they make or do, how productive you are depends on how much people will pay for the things you create. And who makes very-high-value products? Tech and pharma multinationals, which benefit immensely from Ireland’s low corporate tax rates.
“If you look at the growth value-added for the entire Irish economy, last year, the foreign sector accounted for 56% of that. So Google, Microsoft, Pfizer, Meta [formerly Facebook],” said Emma Howard, an economist at the Technological University Dublin. “So they’re producing lots of very-high-value goods, and also because of our low corporation tax rate, some of those goods — they’re intellectual property, right? They’re not physical goods — some of those may be kind of funneled through Ireland to avail of those lower taxes.”
The role of major tech companies in Ireland has been a source of contention between the Emerald Isle and others in the European Union. Ireland threatened to sue the EU earlier this year over disagreement on Big Tech regulation.
Ireland’s latest figures put the country’s productivity per hour at about 2½ times the EU average. When you strip out the foreign sector, it drops but is still around a third higher than the average for the bloc — meaning Irish companies are still helping to drive the economy forward.