Indigenous productivity ’cause for concern’


26 Apr 2007

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Productivity is a cause for concern for the Irish economy, standing at only 1.3pc of GDP, former Eircom chief executive Dr Philip Nolan has said.

Nolan, who will be addressing the annual Irish Marketing Institute conference in Druid’s Glen today, said: “Wealth improvement and increases in the standard of living are only brought about through enhanced productivity.”

Expansion of fourth-level education and successful commercialisation of research and development (R&D) efforts are central to productivity growth Ireland requires if its citizens wish to continue to enjoy the improved standards of living and wealth of the last 10 years, according to Nolan.

Essentially, to continue to improve the standard of living in Ireland, productivity must be increased, he said.

“On the face of it, Ireland is doing well. For the past 10 years productivity growth in Ireland has been slightly ahead of the EU average – somewhere around 2.3pc. However, many of the firms contributing to the economy here are foreign-owned. If we strip out the high productivity sectors supported by foreign investment such as IT and biotechnology, things begin to look very different.

“Doing that, we see that home-grown productivity drops to 1.3pc. This is well below the EU average and a cause for concern,” Nolan warned.

Pointing out that the issue of productivity is fundamentally about people, Nolan said: “Productivity cannot be tackled through monetary or fiscal policy alone. We need a ‘Made In Ireland’ policy created for the Irish context. Productivity is about the performance of people and the research supports this.”

He referred to the Microsoft report on productivity and the National Competitiveness Council’s report last year on competitiveness in Ireland that outlined improving management practice, enabling better quality work through the use of technology and fostering a culture of innovation will all lead to improvements in the output of people at work.

Nolan outlined three concepts that would underpin a productivity policy. “The first is the ‘knowledge worker’, which concerns relying less on the manual skills of workers and more on their information-based skills.

“Along with the knowledge worker must come a competitive economy that drives efficiency and lowers prices for consumer, while still maintaining adequate investment. The third factor to consider is the mobility of talent in an increasingly globalised environment and the importance of Ireland attracting a disproportionate share of this physical capital.”

Nolan said these three facets would be greatly facilitated by the establishment of fourth-level Ireland, commercialisation of the funded research as well as a flexible and adaptable framework for lifelong learning within the average Irish business.

By John Kennedy