ANALYSIS:IRELAND FACES a demographic headache in the decades ahead. The changes in the size and structure of the population outlined yesterday by the Central Statistics Office will entail either increases in taxes or reductions in social provision in the future, writes Paul Tansey.
The reason is a prospective increase in the dependency rate, effectively the ratio of old and young people to the national population. Both the young and the old draw heavily on State services and income supports - education, healthcare, State old-age pensions and child benefit. The problem will be most pronounced in the case of the older population, those aged 65 years and over. In 2006, the population aged 65 and over numbered just 462,000 or 11 per cent of the national population of 4.23 million.
The ratio of older people to the national population is very low in Ireland, about half the ratios in Germany and Italy. It reflects the heavy emigration from Ireland in the 1950s, which depleted the numbers that would now otherwise populate the older age cohorts in Ireland.
However, the middle-aged bulge will push into the older age cohorts in the decades ahead. Combined with increasing longevity, this will lead to a very rapid increase in the population aged 65 and over.
Irrespective of migration trends, the numbers aged 65 and over will increase from 462,000 in 2006 to more than 750,000 by 2021, just 13 years away. By 2041, the over-65s will number between 1.3 million and 1.4 million. At that point, pensioners will account for between one in four and one in five of the population.
Providing the over-65s with adequate State old-age pensions will become an increasing problem, compounded by the fact that private pension coverage is relatively low. Not much more than half the working population has a private pension and the problem is particularly acute among women who work.
The State's population of young people, those aged under 15, is rising again. The number peaked at just over one million in 1981 and declined for the next two decades as the birth rate fell. However, the birth rate has started to rise again and the population under 15 increased by 4.5 per cent to 865,000 between 2002 and 2006.
Even modest levels of net immigration will send the country's youth population over one million again by 2021. If recent net immigration and fertility trends continue, the population under 15 years will rise to 1.167 million in 13 years' time, an increase of over 300,000 or 35 per cent on 2006.
Growth on this scale will not only absorb large amounts of additional public resources in child benefit payments, but, more importantly, it will place heavy demands on the education system, starting with primary schools.
The truth is that Ireland has been living a demographic dream for the past two decades. The numbers under 15 declined while the population aged over 65 grew slowly. As a result, the dependency rate kept declining.
Population growth has been heavily concentrated in the cohorts of working age and the prolonged boom in labour demand ensured that the increasing numbers seeking work easily found a job. The exceptional additions to employment and incomes allowed income tax rates to be cut while still providing substantial revenue growth to finance more services and transfer incomes for the declining dependent population.
Now, the dream is over.