Rapid growth in highly paid employment and corporate tax income drive MNE sectors' contribution to Irish economy

June 27, 2023

Macroeconomics
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Main Findings

  • A third of the wages paid in the Irish economy came from Multinational Enterprise (MNEs) in 2021
  • Rapid growth in highly paid employment and corporate tax income drive MNE sectors’ contribution to Irish economy
  • Real-income growth rate much higher in Ireland than other EU countries

On Tuesday, 27 June, the ESRI will publish a Special Article titled Understanding the Irish Economy by John FitzGerald. 

This article uses the CSO Institutional Sector Accounts to show the separate contributions to the Irish economy from the Multinational Enterprise (MNE) sector and the domestic sector since 2013. The MNE sector contribution is made up of the wage bill paid by these firms and the corporation tax they pay, while the domestic sector’s contribution also includes the profits of firms.

Using the CSO data, the share of Net National Product [1] arising from the MNE sector in 2021 amounted to 29%, up from 22% in 2013. About half of this increased contribution was due to the rapid growth in highly paid employment in the sector, and the other half to the rise in corporation tax. By 2021 a third of the wages paid in the Irish economy came from MNEs.

Real income growth rate   

Using these data, this article also estimated the growth rate in real income over the period 2013 to 2021. It uses a slightly different methodology to the CSO, but arrives at a very similar average growth rate of real income over the period 2013-2021: 4.4% a year compared to the CSO’s estimate of 4.2%. This is a much higher growth rate than that experienced over the same period by other EU countries of 1.5%.

Standard of living  

The article also considers how the standard of living in Ireland compares to our EU partners (and the UK). These comparisons are based, not only on the standard national accounts aggregates but also on data on absolute price levels. Combining these data, Ireland has a below average standard of living on the basis of household and public consumption. This is partly because of high rate of saving in Ireland, but it also reflects difficulties in comparing the value of housing enjoyed by the population in different countries.

Using GNI* as a measure of national income, Ireland appears to have an above average standard of living. A crucial factor in Ireland’s high standard of living using GNI* is the large surplus on the current account of the balance of payments, reflecting a high rate of national savings. These savings can, potentially, fund future growth through investment.

[1] NNP is preferred to the more usual GNI* as it excludes all depreciation, both from MNEs and the domestic economy.