Population trends show need to plan ahead

It is not uncommon to hear commentators of a certain persuasion lament the fact that Ireland’s expenditure in areas such as health is significantly lower as a percentage of GDP than in many other developed economies.

Indeed last year, it is estimated that total expenditure on health in Ireland was equivalent to somewhere in the region of 8.5% of gross domestic product (GDP) or over 10% of gross national product (GNP), which is a more meaningful measure in the Irish context.

In contrast, the French spend around 11.9% of GDP on health, and the Swedes and the British around 9.6% of GDP.

It appears that Ireland is not too far out of line with international norms in terms of expenditure on health, although it is still lower than developed economy norms.

However, statistics need to be interpreted very carefully. One of the key considerations regarding health spending is the age profile of the population.

Where a country has an older population, you would expect health expenditure to be higher and where there is a young population spending should be lower.

Ireland still has a relatively young population. In 2011, the CSO estimated almost 34% of the population was under the age of 25 and over 50% was aged under 35.

Earlier this week, the CSO released Population and Labour Force Projections 2016-2046. This attempts to project how various aspects of our demography might develop out to 2046 under a number of different scenarios.

The key factors that drive population and labour force growth are fertility rates, mortality rates, migration flows and labour force participation rates.

Migration is the most difficult to forecast because it is subject to factors such as quality of life, employment opportunities and legal factors influencing migration in both the domestic and external economies.

For business planning and marketing purposes, the CSO findings are very interesting because they provide a picture of how various age segments of the population are likely to trend and hence where advertising might be best directed.

From a broad economic perspective, the insights are even more valuable in terms of what they might imply for the demand for public services.

The CSO is projecting that the population of primary school aged children could increase by between 87,800 and 100,300 by 2021, which is seen as the peak. This would represent an increase of up to 20% on the 2011 situation.

This has clear implications for the provision of both physical and human capital resources in primary education. Lots more schools to be built and lots more teachers to be employed. Of course, this growth will then feed into second and third-level education provision with a short time lag.

It is imperative for the future prosperity of the country that investment in education is strong and well directed and that we nurture a well-paid, well-trained and very motivated teaching cohort. I fear that is exactly what we are not doing at the moment. We need to wake up to that reality before it is too late.

The other interesting aspect of the latest projections is the trend in the over-65 age cohort. The population of older people is set to grow from 532,000 in 2011 to between 850,000 and 860,700 by 2026, and to almost 1.4m by 2046. This has massive implications for demand for health services and pension provision.

In fact the Department of Finance, in a separate publication this week, projected that ‘age-related expenditures’ would increase from 26.6% of GDP in 2010 to 33.6% by 2060.

The implications are very clear and very stark — we need to address the pensions crisis and the crisis in the delivery of health services as quickly and effectively as possibly.