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Not only on the Football Field are we Out-scored by Germany: A huge Productivity Gap

Figures on productivity, as published by the Office for National Statistics (ONS) on Friday (6 October) are rather more serious than the 3-1 score at Windsor Park.

In 2015 and 2016 each German worker produced about one-third more than his/her counterpart in Northern Ireland. And, for each hour worked, a German delivers almost 70% more than his/her counterpart in Northern Ireland [See Note 1 below].

Esmond Birnie, Senior Economist at the Economic Policy Centre said,

“The Northern Ireland-Germany productivity gap is a longstanding phenomenon. It existed in the 1980s and probably long before that too. [See Note 2 below]

A 3-1 result against one of the world’s best football teams may be not too bad, but unfortunately low productivity has bad results for us all. Being in the World Cup is one thing, but being unable to compete in world markets is another.

Low labour productivity reduces the ability of Northern Ireland to support higher wages and living standards.

Notes 

One- The steps in our calculation of the Northern Ireland-Germany labour productivity gap were as follows:

  1. In 2015 GDP per hour in Germany was 135.9% of the UK average and 134.5% in 2016. In 2015 GDP per worker in Germany was 111.1% of the UK average and 109.3% in 2016. (ONS 6 October 2017, UK Productivity April-June 2017 International Comparisons of Productivity (ICP), First estimate 2016).
  2. In 2015 GDP per hour in Northern Ireland (smoothing out year-on-year volatility) was 80.3% of the UK average and GDP worker was 84% (also smoothed) of the UK average. No direct comparison has yet been made for 2016. (ONS 6 January 2017, Regional and Sub-Regional Productivity).
  3. Steps 1 and 2 imply in 2015 GDP per hour in Germany was 169.2% of the Northern Ireland level and GDP per worker in Germany was 132.2% of the Northern Ireland level.
  4. Recent productivity growth the UK has been:

0.1% Q1 2015 to Q1 2016 and 0.2% Q1 2016 to Q1 2017 in terms of GDP per hour (ONS 6 October 2017, as above).

0.3% Q1 2015 to Q1 2016 and 0.4% Q1 2016 to Q1 2017 in terms of GDP per worker (ONS 6 October 2017, as above).

5. Recent productivity growth in Northern Ireland has been:

2.1% Q1 2015 to Q1 2016 and -1.3% Q1 2016 to Q1 2017 in terms of GDP per hour (ONS 6 October 2017, Quarterly Regional Hours and Productivity Jobs, NISRA July 2017, Northern Ireland Composite Economic Index).

0.0% Q1 2015 to Q1 2016 and 0.5% Q1 2016 to Q1 2017 in terms of GDP per worker (ONS 6 October 2017, and NISRA July 2017, as above).

Note, these recent productivity figures for Northern Ireland should be regarded with caution- the labour data for Northern Ireland (numbers of hours or numbers of workers) are an experimental ONS data series, and these have been combined with an entirely different data series- the Northern Ireland Composite Economic Index. Notwithstanding questions relating to the data, it is likely that in Northern Ireland, as in the UK as a whole, in recent years productivity levels have been flat in broad terms. Previous ONS data on regional productivity has implied Northern Ireland productivity growth lagged the UK average during 2007-15.

Two- the Northern Ireland-Germany productivity gap in the late 1980s was measured by a study which compared matched factories in the two areas; D.M.W.N. Hitchens, K. Wagner and J.E. Birnie 1990, Closing the Productivity Gap.