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View from Dublin: We must keep an eye on our ageing future workforce


Brendan Keenan

Brendan Keenan

Brendan Keenan

More bad news. The fertility rate has fallen to 1.9 children per female, which is less than the 2.1 average needed to keep the population stable.

Okay, it's not exactly breaking news. The figure fell below that key number in the 1990s, but rose above it for much of the 2000s, before falling back again in the last few years. It is also the longest of long-term issues, so there is no great urgency. That, perhaps, is part of the problem.

One has only to look around Europe to see that it should not be endlessly long-fingered. Several countries, especially Germany, face astonishing falls in their population over the next few decades. With hindsight, it seems surprising that, decades ago, governments did not try harder to keep their populations stable.

Not that it is easy to do. Changes in the fertility rate are not well understood. Much of it is social, rather than purely financial, but policy must come into it somewhere and Ireland is unusual in the degree of incentives it offers to those who have children.

The main one is child benefit, payable at €140 (£124) per month per child. That is a substantial amount, especially for those on low incomes. A family with three children, on half average earnings, will see their income substantially improve when benefit is taking into account.

Research suggests it is the single most effective anti-poverty measure and the main reason such a family is the most lightly taxed in the OECD: they are actually net beneficiaries of the system.

There are economies of scale in child-rearing, making the benefit for the third child and beyond worth more in net terms, even if no longer in cash terms. Against that is the inexplicably high cost of childcare in Ireland. Government inertia on this question does not suggest any serious intent to get back above that critical stability birth rate.

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There is understandable confusion between the fertility rate and the birth rate. While the former - babies per mother - is now lower than that of France; the latter - babies per 1,000 of the population - at 13.5, is the highest in the EU.

That reflects past fertility rates - we have more women of child-bearing age - and migration flows.

Those past fertility rates also mean the largest group of the Irish population is the 30-39 age group - prime working and reproduction age. Ireland's population will remain much younger than the EU average.

Unusually too, it is expected to grow (although so is that of the UK). In the ground-breaking analysis of future demand for healthcare, the ESRI estimates that the population will grow by up to one million by 2030 - an increase of more than 20%.

The combination of these trends means the proportion of old people will also rise faster than the EU average. One has to do a little bit of thinking to realise that this is perfectly compatible with having the youngest population overall. Nevertheless, the expected 90% increase in those aged over 80 will be an enormous challenge, even though they will represent less than 3% of the total population.

The more new young hands which arrive, either through childbirth or immigration, the better when it comes to the cost of an ageing population.

But mere numbers are far from the end of the story. The bare bones of it were laid out in the 2017 KPMG review of the finances of the social protection system carried out every five years.

It is based on the assumption that the five people at present working for every person over 66 will have declined to three by 2030.

There will need to be major changes - astonishing changes - over the next 10 years to handle that situation; never mind the one facing the two workers for every person over 66 in 2050.

There has been one undoubtedly major change, with the increase in the retirement age to 67 from 2021 and 68 in 2028.

That alone would increase the proportion of people at work by 17%, but it assumes that everyone will work to the new limits and that is far from certain.