THE ageing population of Ireland presents economic pressures for the future which must be addressed today, according to a new report.
Ireland’s Minister for Finance, Michael McGrath has this week published figures relating to the age demographic in Ireland and its projected impact financially on the nation in the years to come.
Currently, the age profile of the Irish population is relatively favourable, the Population Ageing and the Public Finances in Ireland report claims.
However, this will “shift substantially over the coming decades” the report warns, with the associated costs set to cripple the economy if not addressed.
According to the findings, Ireland will experience one of the largest proportional increases in the ratio of people over the age of 65 to those of working age between now and 2050.
While there are currently around four people of working age to each person over the age of 65 in Ireland, by 2050 the equivalent figure will be around two people working for every person retired.
“This will have significant implications for the public finances,” the report states.
“An ageing population will dampen economic growth as the labour supply expands at a slower pace and growth in output will be increasingly dependent on labour productivity gains.”
The report claims that if government policies are not changed to accomodate this future shift in population demographic, the country’s aging population will require age-related funding of over €16 billion (in 2022 prices).
As a result, the Government has announced the establishment of a Future Ireland Fund to offset some of the projected costs, but the report adds that “further reforms will be required to fully address the fiscal pressures associated with an ageing population”.
“The analysis published by my department highlights the scale of the challenge an ageing population presents to our public finances,” Minister McGrath admits.
“While it is, of course, a very positive development that people in Ireland are living longer and healthier lives, it is important that we note the significant implications these trends will have for the economy and the public finances.”
He added: “In overall terms, the impact of an ageing population on the public finances will be significant.
“Total age-related expenditure will increase by six percentage points of national income over the next three decades, the largest increase in the EU.
“It is in this context, and to promote intergenerational equity, that the Government is preparing for the establishment of two long-term funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund.
“These funds will save a portion of ‘windfall’ corporation tax receipts to help offset some of the costs associated with long-term structural challenges, including an ageing population.
“Nevertheless, it is clear absorbing the costs of an ageing population will require additional policy responses.
“The alternative to this is to place a significant financial burden on future generations.”
