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Giving couples cash incentives to have more children and using robots to help care for the elderly are among a wide range of ideas considered in a new Government survey.
A new Economic Insights document published by the Department of Finance entitled Irish Population Ageing: The Land of Saints and Seniors, highlights how systems such as social insurance, pension schemes and social support models are all under pressure with rising life expectancy,
Population ageing will also place downward pressure on economic growth and labour supply, it points out.
As the pace of population ageing accelerates, several countries are adjusting policies to accommodate these impacts, notes the report – adding that the lessons learned from these countries are increasingly relevant for Ireland as the demographic shift towards an ageing population gains momentum.
The report warns that Ireland’s current “relatively young” population is set to age rapidly over the next few decades. We now have the highest proportion of persons aged 15 and under in the EU and second lowest proportion of individuals aged 65 and over.
“As such, Ireland’s median age of population is favourable, at almost 40 years old in comparison to 45 years old in the EU. Ireland’s relatively young demographic structure is a product of the large cohorts born between the late 1970’s and 2000’s, when Ireland had an above average birth rate,” says the report.
However, over the next 40 years, Ireland’s demographics are set to shift significantly due to declining fertility rates and rising life expectancy.
Ireland now faces a significant increase in the population aged 65 and over alongside a decrease in the number of people aged 49 years old and under.
Current policies mean that this will lead to significant increases in public spending for pensions, healthcare and long-term care.
A previous government report, Future Forty, projected that age-related expenditure (healthcare, long-term care pensions) will increase from 36 per cent of total voted expenditure in 2025 to over 46 per cent by 2065.
In addition to that, the report warned that economic growth is expected to slow over time, with Future Forty projecting it will approach 0.5 per cent annually by 2065.
This slowdown is attributable to “demographic headwinds stemming from our rapidly ageing population, as well as an expected moderation in productivity growth,” it adds.
The report asks what Ireland can learn from other countries, including Poland and Japan, who are addressing their ageing populations.
Between now and 2050, countries including Japan, Korea, Greece, Latvia, Lithuania, Italy and Poland are projected to decline on average by nearly 16 per cent.
Such nations have also experienced a marked increase in their elderly population. In Japan, the population aged 65 and over in 2023 represented almost 30 per cent of the population – nearly twice the level in Ireland.
Yet by 2050, the percentage of the population aged 65 and over in Ireland will have reached similar levels to Japan today (27 per cent), the Department predicts.
The document notes that ageing countries have pursued pro-natalist policies to tackle the impact on economic growth, labour markets, consumption, and public finances.
The first wave of countries experiencing population ageing have already begun to feel these economic consequences, the report highlights – adding that the policies employed by these countries “will be important considerations for Ireland as our population continues to age.”
It notes that such policies include pro-natalist interventions, increasing labour force participation and reforms to reduce healthcare costs.
It uses Japan as one example – noting that the Japanese government has introduced several measures over the years to make having children an easier and more attractive option, including the Angel Plan in 1994 and the New Angel Planin 1999.
In 2009, the Japanese government introduced the Plus One Policy which aimed to create parent-friendly working conditions, with funds allocated for the construction of 50,000 new daycare facilities.
It notes that other countries have also turned to pro-natalist measures, and that spending on such policies in the EU has risen by over 50 per cent between 2000 and 2021.
A Prominent efforts included in the report is the 500+ programme in Poland, along with the CSOK policy in Hungary.
The Polish programme, launched in 2016, provides direct cash payments to parents with two or more children, The programme had a total expenditures of around PLN 20 billion (c. €470 million).
The CSOK policy in Hungary, meanwhile, was launched in 2015 and offers up to 20 million HUF (nearly €65,000) of assistance per family with three or more children to buy newly built homes.
“Analysing the rolling change in crude birth rates over the 12 months from when each country launched its pro-natal policies offers insight into their impact. Hungary’s program nudged births up slightly, while Poland’s birth rate rose dramatically after its 500+ program was implemented.
“This may be because Poland’s policy is very generous, offering nearly universal cash benefit for many families, whereas Hungary’s pro-natalist policy was more limited, offering targeted loans and other financial incentives,” the report notes.
It does say that the effects of both policies were “short-lived,” and that in 2018, the fertility rate in Poland fell from 1.6 to 1.5 and in Hungary in 2017 the number of children born decreased below 2015 levels – suggesting that on their own, financial supports “only have small or transitory effects on fertility rates.”
The Department of Finance says: “Given these trends, it is likely that a more multifaceted policy approach is required to increase fertility rates.
“Results from an OECD-wide regression on the impact of public policies on fertility rates found that public spending on parental leave, early childhood care programmes, paid leave available to mothers, financial support for households with children and general housing costs influenced fertility rates.
“While these results are based on a small sample, they give some indication of the broad suite of policies available to influence fertility decisions in developed countries.”
It says that even Nordic societies who have “been at the forefront” of promoting such programmes, including generous parental leave, childcare and cash benefits have experienced declining birth rates with a rising average age for first-time parents.
“This suggests that there are likely deeper societal and cultural shifts at play leading people to delay parenthood or desire fewer children, even in the presence of generous support.”
MAKING PEOPLE WORK LONGER
The briefing document adds that the ageing population will mean it is important for countries to increase labour force participation.
In countries such as Italy, Poland and Greece, it notes, there could be on average up to 90 retired people for every 100 workers.
“To maintain living standards, efforts should be taken to retain workers towards the end of their career, including by removing disincentives to work at older ages and through initiatives to support life-long learning. One way to encourage greater workforce participation for older persons is pension reform,” says the report.
It uses Italy as an example – stating that since 1992, Italy has gradually raised the age of retirement in the private sector.
“In 2010, the old-age pension was tied to life expectancy and in 2019 the age requirement for old-age pensions was raised again. By 2019, the standard age for receiving an old-age pension was 67 in Italy.
“Consequently, employment rates among old age groups in Italy increased, with the employment rate for men aged 55 to 65 increasing by almost 25 per cent over the last 20 years, narrowing the gap with respect to other euro area countries. For women, the increase was even larger – 30 per cent, although the gap between euro area countries and Italy remained broadly stable.”
While Ireland increased the state pension age from 65 to 66 in 2014, recent analysis from the ESRI found that the reform had no impact on labour force participation or hours worked. Instead, there was a significant substitution into alternative welfare programs
However, this analysis was only performed for the years immediately following the increase in state pension age and it was not possible to estimate a longer-run effect, the report points out.
The report includes the use of robots in Japan as among an array of reforms introduced to reduce healthcare costs.
ROBOTS FOR CARE OF ELDERLY
To address rising healthcare expenditure requirements, several countries have adopted reforms to improve the cost of care delivery and reduce expenditure pressures.
Japan is one such example, with the Government heavily subsidising initiatives to develop and deploy robots for elderly care, so as to ease the burden on human caregivers.
The BBC has reported that such devices are designed to physically support or lift elderly individuals, compensating for a lack of human care workers.
“For example, in response to rising costs and challenges in financing universal long-term health care, Japan has pursued technological improvements that automate aspects of elderly care.
“Japan has been at the forefront in the development of technologies such as ‘care robots’ to improve the quality of care in nursing homes while reducing labour requirements,” says the report.
Similarly, it says, Singapore has also invested in technological healthcare solutions for its ageing population, such as improving wearable wellness technology and smart home solutions such as fall detect sensors to facilitate independent living and ease pressure on healthcare systems.
“Ireland’s healthcare system is also undergoing substantial reform in response to an ageing population and rising healthcare demands. “Sláintecare” 38 aims to move the health system from a model centred around expensive acute care, to one focussed on the delivery of primary and community healthcare at a local level.
“The Enhanced Community Care programme is one such policy pursued under these reforms, with this providing community and primary care services at a local level so as to reduce avoidable and unnecessary admissions to hospitals. Public health measures, including disease prevention, vaccination and healthy ageing can also play a role in reducing healthcare demand and expenditure pressures,” it adds.
Ireland has already seen a “substantial” rise in total healthcare spending – rising by 60 per cent over the last decade alone.
In conclusion, the report says that as population ageing accelerates, there is a crucial window of opportunity for reform.
“Countries, including Ireland have only a few years to intensify efforts before demographic effects take hold,” warns the report, adding that valuable lessons can be learned by examining the policies of other countries.
“Given the enormous demographic shifts that Ireland will experience over the next two decades or so, it will be vitally important that these lessons are learned,” it concludes.
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