Raising taxes not the only solution to 'pensions timebomb', Oireachtas committee told

Irish citizens need to upskill to deal with changes the economy will experience as the workforce ages into retirement, experts have warned. File Picture: iStock

Preparing for Ireland’s pensions timebomb does not necessarily mean raising taxes, but whatever changes are to be made need to happen now, an Oireachtas committee has heard.

The budget oversight committee has heard from representatives of various think tanks regarding the looming black hole for Ireland’s public finances, with the overriding message that Irish citizens need to upskill in order to be prepared for the changes that the economy will experience as the workforce ages into retirement.

With Ireland’s fertility rate at an all-time low — in common with most Western countries — and the workforce ageing at a greater rate than it can be replaced, the country faces a situation in about 25 years when the Government will not be taking in enough money to cover the necessary expenditure on its own citizens.

Adele Bergin, an associate research professor with the Economic and Social Research Institute, told the committee that it is not automatically necessary to raise taxes to combat the issue — that it is also possible to change how the Government spends its money, but that this decision “is a choice of policy makers”.

What is most important is the need to upskill the entire population so that they can fulfil the highly-skilled jobs which will be the bedrock of the future economy, according to Grainne Collins, a policy analyst with the National Economic and Social Council.

“A lot of migrants [coming to Ireland] are high-skilled, but we do need to grow our own. We need to increase productivity, so we need to upskill everyone in the country,” she said, adding that “pretty much all sectors” will be affected.

“We don’t know how AI will affect the future, but we’ll need high-skilled workers,” Dr Collins said, while noting that Ireland has “to be careful” not to just import highly-skilled people, given that as that process occurs, “we leave other gaps behind that we have to fill”.

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Meanwhile, Paul Egan of the ESRI described the ageing population issue as being “a great opportunity”, and not necessarily just a risk.

“If we get out ahead of it now, so say in 20 years we’re not talking about low-skilled jobs not affected by AI, then it’s a great opportunity,” he said, while sounding a warning about countries such as Japan and South Korea which “are already there” in terms of an ageing workforce, in that their fertility rates are so low that the population has begun to shrink.

Dr Egan said that the investment specifically in the skills of the population should be a starting point and “the basis of an innovation cycle”. “We need to think about it in a new way,” he said.

All present agreed that higher levels of migration will be necessary to sustain the population as time passes.

Professor Martina Lawless, director of the ESRI, noted that high levels of migration into a country are “almost always positive”, while Dr Collins said that low-skilled migrants entering an economy are “still positive contributors, the evidence is quite consistent in that area”.

Prof Lawless, meanwhile, observed that Ireland remains “somewhat younger” than its European counterparts, given the arrival of migrants aged between 20 and 40 is “pushing against the ageing of the Irish population”.