The State’s population could grow to 7.6 million within four decades if current migration trends continue, according to new research by the Department of Finance.
As part of a “scenario analysis”, the department produced a range of population projections for the Republic to the year 2065.
In its central scenario, which assumes net inward migration ranges between 35,000-40,000 annually, the population reaches 6.77 million by 2065.
In a high-growth scenario where net migration is assumed to be higher, between 53,000–58,000 annually, the population climbs to 7.59 million by 2065, more than two million above the current level (5.4 million).
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Both estimates are higher than the Central Statistics Office’s (CSO) current projections.
The department’s chief economist, John McCarthy, said the estimates were higher because it was assuming greater levels of inward migration.
A significant increase in net migration would also “pose challenges” ensuring that public services, housing and infrastructure can “keep pace with demand,” the report says.
In a low-growth scenario where net migration falls back to 18,500 annually, the department predicts the population will reach six million in 2065.
The high-growth scenario assumes the State’s fertility rate – the average number of children a woman is expected to have in her lifetime – remains at the current rate (1.5) while the other scenarios assume it falls, a trend that has been seen in most industrialised countries.
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The department’s demographic outlook is contained in a new report entitled “Future Forty” which assesses how various population trends would impact the economy over the next 40 years.
The chapter on how these changes might impact the economy and the State’s fiscal position will be published after the budget.
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The department’s report noted that population growth is typically driven by natural change (the ratio of births to deaths, which is relatively easy to predict) and by net migration, which, in recent years, has been difficult to predict.
It said it adopted a “bottom-up” approach to forecasting, assessing the likely push factors for inward migration such as family reconciliation and work permits.
It predicted the State’s labour force would continue to grow until 2047 before contracting but in the low population growth scenario this contraction could begin from 2041 onwards with negative implications for the labour market.
Many economies in Europe and elsewhere with ageing populations and low birth rates are suffering from skill shortages. “Migration appears to be the sole driver of labour force growth in the long run,” the report said.
It also noted that 60 per cent of high-skilled immigrants left Ireland within five years, which had negative implications for productivity and for the Government’s fiscal position as they tend to pay more tax.
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It linked this trend to the quality-of-life issues including the high cost of accommodation.
The report estimated that the State’s old-age dependency ratio (the ratio of retirees to workers) will increase from 23.1 per cent in 2022 to 55.2 per cent in 2065.
“This will have significant policy implications for pension sustainability, the working-age tax burden, labour market dynamics and healthcare demand,” it said.
The State’s pension system relies on contributions from workers to support retired ones. Similarly the income tax receipts generated from workers (they amounted to €39 billion last year) pay for the healthcare costs associated with those who are no longer economically active.
The report said Government departments should prepare contingency plans for a high-case migration scenario to avoid potential infrastructure bottlenecks constraining growth.
“These plans should include details on when to activate specific actions to respond to higher levels of migration and boost infrastructure capacity,” it said.
