The population of Ireland is getting older, which implies that the labour force will decrease in comparison to the retired population in the near future. This can possibly strain government finances and limit economic expansion. However, there are elements that counteract this.
Due to increased longevity and health, as well as economic requirement in some situations, individuals are choosing to retire somewhat later in life. Importantly, more women are either joining or continuing in the workforce. These changes, which form part of a significant global shift, have seen an alteration in the usual balance between having children and working. This pattern will be one to observe in the coming years, particularly given that the number of working women in Ireland remains below the international standard.
The Department of Finance has recently published a report titled “Population Ageing and the Public Finances in Ireland,” analysing Ireland’s ageing population and its economic implications. The analysis paints a stark picture: despite the Irish population remaining relatively youthful compared to global figures due to a declining birth rate from about 2010 onwards, rapid changes are on the horizon.
As the proportion of working people decreases and the segment of retirees expands, transformations may be slow but inexorable. Currently, the working-to-retirement age ratio stands at about 4:1. However, by 2050 it is estimated to drop to roughly 2:1, which could decelerate the possible average growth rate of the economy from 2.25% to 1% by 2050. This could cost the government approximately €16 billion annually in terms of today’s value. The enormity of this figure is underscored when compared to the €14 billion total measures involved in the 2024 Budget.
The underlying issue will be the rising tax burden on the younger generation who will be left dealing with the retirement costs of older citizens. Controversially, the Department of Finance’s report suggests raising the age at which individuals become eligible for the State Pension. This concept, however, has been widely dismissed within the political arena.
According to the Department for Finance, various strategies will likely be necessary in forthcoming years to fulfil the financial obligations, encompassing modifications to pensions, healthcare and long-term care systems, restricting non-age-related expenditure, or implementing tax rises. These measures are predicted to ease the strain on public coffers gradually throughout the term of the next government, particularly by the latter part of the 2020s. This might potentially lead to an overall tax surge unless we witness a significant rise in corporation tax.
Yet, there are other simultaneous events occurring unnoticed. For instance, the effect of a growing older population on the labour force can be counterbalanced by several catalysts. One such catalyst is immigration with incoming citizens usually being younger, thereby increasing the working-age populace. This has been a crucial element in Ireland particularly in the period leading to the financial downturn and more recently when there was a sharp rise in growth from 2016 onwards.
The average net immigration, which is the difference between incoming and outgoing populations, within a decade from 1998 to 2008 stood at 45,000 individuals or nearly 1% of the population annually. Similar patterns were observed just before the pandemic hit followed by the imposition of travel restrictions. A higher rate of net immigration over the past couple of years signifies both economic migration and the arrival of refugees from Ukraine and other places, with some of them also joining the workforce. Over time, the Department anticipates a continuation of this inflow, albeit at a reduced rate.
Older people extending their work period is another aspect that contributes towards the expansion of the labour force. Now, in Ireland, individuals in their 50s are more likely to keep working into their early 60s compared to previous years – and these retention rates exceed the international averages. It’s also projected by the Department of Finance that there will be a progressive increase in the number of individuals working beyond the age of 65.
The last factor that can compensate for an ageing population is a productivity boom amongst those in employment. Although measuring productivity is difficult, there is a notable disparity between the multinational sector in Ireland and the domestic industries.
3. The Woman’s Contribution: One final significant trend is the noticeable increase in female participation in the workplace, a trend expected to persist. Internationally, this progress represents a major shift that has evolved over the last three to four decades. In the 1980s, women frequently had to make a crucial decision, as identified by scholars, to become mothers or maintain their careers. Yet, as reported by Department of Finance’s review of international studies, modern women generally determine to start families at various stages of their professional journey.
Observation on a lengthier timeline, especially the patterns that emerged in the 20th Century, particularly after WWII, shows a gradual increase in the proportion of women in the workforce while fertility rates dropped. However, this connection experienced a reversal since the 1980s due to a combination of social and economic reasons. As per a report from the International Monetary Fund authored by prominent researchers, this denotes a “fundamental economic transformation”. During the 70s and 80s, women in less affluent nations tended to have more offspring, a circumstance that no longer holds true.
These researchers highlight four elements that account for the variations in compatibility of career and family across nations: family policies, partnership of fathers, supportive societal norms, and adaptable job markets. From a policy perspective, availability of affordable childcare can make a significant difference – in countries like Sweden and Denmark, where childcare is affordable, there is high female participation in the workforce. Also critical is the functioning of job markets where women with care duties often struggle to secure a permanent role and are confined to temporary work. Societal norms play a role too and although criticism for not being a stay-at-home mother is less common these days, it still exists in some countries. Meanwhile, fathers are assuming a more hands-on role in many circumstances, thus overturning the traditional paradigm.
In Ireland, the growth of women’s involvement in the workforce continues to climb at an impressive pace. Since the turn of the millennium, it has increased from less than half to over 60%. Notably, since the onset of the pandemic, there has been a significant jump from the previous rate of 56% for women in the workforce. This spike has largely been attributed to the enhanced provision of flexible work arrangements that has followed the pandemic shutdowns. According to the Central Statistics Office (CSO), the number of actively-employed or job-seeking women has grown from 735,000 in 2000 to 1.33 million in the present day. Simply since 2019, an increase of over 200,000 women has taken place, thereby making women responsible for the majority of the increase in overall employment since that time.
Whilst these figures are impressive, compared to international benchmarks, they are perceptibly low. The average for Organisation for Economic Co-operation and Development (OECD) nations reached a record-breaking 66.7% last year, with numerous developed nations recording figures above 70%. There is a strong probability that in Ireland, the number of dual-income households will keep rising due to both personal choice and economic necessity, such as housing costs. Furthermore, with the ageing of the populace, it is expected that more women will constitute the older demographic segments, likely leading to an increase in female workforce participation.
In the previous year, male employment in Ireland grew by 21,600 or 1.5%, while female employment expanded by 29,900 or 2.4%. With current figures showing 1.43 million men and 1.27 million women employed, it seems plausible that the 160,000 gap could shrink further in the years to come.