Pro-natalist policies have “virtually no impact”, the Department of Finance’s Chief Economist has said.
Speaking at the launch of the Department’s Future Forty long-term economic assessment in Dublin on Tuesday, Finance Minister Paschal Donohoe was asked whether Ireland should consider policies aimed at increasing the birth rate as a means of mitigating the demographic decline that threatens social services like the pension system long-term.
Similar measures have been pursued in states like Hungary, Norway, France and South Korea in an attempt to combat their ageing populations.
Donohoe replied that the number of children people have is ultimately “a choice for families”.
He said the report sought to outline how Ireland’s changing age profile would affect economic growth in the decades ahead.
“There has been a growing and young population over the last number of decades,” Donohoe said.
“The forecasts here outline the likelihood of a population that’s still big by historical standards but is also older.”
Donohoe added that the Government’s focus was on affordability and access to childcare rather than measures to encourage higher birth rates.
“That is why the work that we do with regard to the affordability and accessibility of child care continues to be very important,” he said.
“And I think that’s the most sensible way a government can be of help in recognising and supporting the choices that families want to make for themselves. Because fundamentally I believe it’s a choice for families and for parents. It’s their decision rather than a decision that any government can make on their behalf.”
McCarthy also outlined the scale of demographic change projected for the decades ahead.
He said Ireland currently has four workers for every retiree, a ratio he said was among the strongest in Europe.
“We now at this point have four people of working age supporting each retiree,” McCarthy said.
“No other country in northern Europe or southern Europe or advanced economy is in that space.”
He noted that this ratio is expected to decline significantly from the mid-2030s onward.
“So by the 2060s we will have only two people, so you and I will support one retiree,” he said.
When asked whether Ireland should consider pro-natalist policies similar to those introduced in countries such as Hungary or Norway, McCarthy said international experience showed little effect.
He said several countries had already trialled strong incentives to encourage larger families.
“I think, leaving aside whether from an Irish perspective, if you look at the experience of lots of countries who have tried this, the efforts have been really zero,” McCarthy said.
“These are all countries that have tried these policies.”
He pointed to Hungary, where certain families receive long-term tax exemptions depending on the number of children.
“In Hungary if you had a fourth child you were free from income tax for life,” he said, claiming that this “had no impact whatsoever.”
McCarthy said factors such as housing and childcare costs were more closely linked to fertility decisions.
“It supports the need to support child care and housing because these are the factors that may be depressing fertility,” he continued, but noted that active measures to encourage people to have more children have “virtually no impact”.
Fertility rates have declined across most European countries in recent decades. Ireland’s fertility rate, while still one of the highest in the EU, has decreased steadily in recent years.