Warning of pressures on public finances as population ages

The State is facing major demographic pressures across a number of key areas including education, health and social protection in the coming years with significant implications for the economy and the public finances, according to a new Government spending review.

The review into trends in public expenditure said that a "demographic bubble" is working its way through the school system in Ireland and this will present a fundamental challenge for the Department of Education.

The review said that demographic pressures at primary school level peaked at 567,800 students in 2018/19, with the primary school population expected to decline year on year from 2019 to 2034.

It said post-primary enrolments are expected to peak in 2025 and then be followed by a year-on-year decline for the following decade, up to 2035, “resulting in oversupply of teachers at second level”.

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Last month, a Department of Education report estimated that it was facing an oversupply of more than 13,000 teachers at primary level in 2029, rising to just over 17,000 nine years later.

The new review from the Department of Public Expenditure said the supply of teachers at both primary and secondary level “needs to be carefully managed over the coming years, while having regard to challenges faced in meeting regional variations”.

“While the decrease in demand for primary teachers can be offset to some extent by the non-replacement of retiring teachers, the supply of teachers must be managed at post-primary level to ensure the needs of the sector are being met, particularly with regard to priority areas such as languages and Stem [science, technology, engineering, maths] subjects,” it said.

Unfavourable trends

Of the overall demographic profile, the review said Ireland compares favourably against many other EU member states.

It said that at 38 years of age, Ireland’s population has the joint youngest median age in the European Union, with the highest share of the population aged less than 19 years (27 per cent) and the lowest share of the population aged 65 years or over (14 per cent). In addition, it said Ireland has one of the highest fertility rates in the EU.

However, it said unfavourable demographic trends in the coming decades “will have significant implications for the economy and the evolution of the public finances”.

“Foremost amongst these is a projected significant rise in age-related public expenditure, as a larger share of the population moves into age brackets requiring such spending.”

The review said that the forecasted increase in demand for nursing home places may see a significant increase in healthcare spend into the future.

The spending review also said that for the Department of Social Protection demographic pressures will continue to drive up recipient numbers and costs, particularly in relation to pensions.

Demographic changes, higher participation rates and future funding structures will “continue to pose a considerable challenge in the higher education sector”, it said.

Full-time student enrolments have increased from 173,649 in 2015 to 189,904 in 2020 with a projected further increase of 25 per cent (238,232) by 2029.