Minister Donohoe publishes report on Ireland’s demographic outlook for next 40 years

Future 40 -Ireland’s Demographic Outlook considers impact of migration in coming years

Ireland - The Department of Finance is today publishing a report on long-term demographic trends. This report considers how Ireland’s population and demographic profile may change over the coming four decades, given certain assumptions regarding migration, fertility and mortality rates.

The paper comes in advance of a larger piece of work from the Department of

Finance, Future Forty, which will consider how a broad range of economic and fiscal drivers might affect Ireland over the next forty years.

The Department is publishing this stand-alone paper, Future Forty: Ireland’s Demographic Outlook; reflecting the key role demographics will play in shaping future economic and fiscal policy.

Speaking on the publication of the report, Minister Donohoe said:

“I am delighted to announce the publication of Future Forty: Ireland’s Demographic Outlook. This has been developed as part of the wider Future Forty work programme that my Department is currently undertaking.

Changes to the size, and age profile, of our population will have far-reaching impacts on the future of our economic and fiscal well-being. We must consider how these potential changes will affect our labour market, the delivery of public services and the continued growth of our economy. As our population ages, we will require strategic and innovative solutions to sustain economic growth, deliver higher standards of living and facilitate enhanced levels of productivity.

This Demographic Outlook report provides us with a range of potential population scenarios over the next forty years, which will help us to gain a greater understanding of how Ireland’s population may change and grow over time, providing us with a vital tool for effective long-term policy-making and strategic planning.

This report uses an innovative and novel approach to project future net migration, which allows us to consider in more detail the various groups of people who move to, and leave, Ireland. This fresh approach and increased level of detail aids decision making and showcases the Government’s commitment to evidence-based policy.

I look forward to the upcoming publication of Future Forty which builds upon this Demographics report to illustrate a range of specific issues and topics that will impact Ireland over the next 40 years.”

Future Forty: Ireland’s Demographic Outlook demonstrates how alternative scenarios for future net migration and fertility rates can affect projections for Ireland’s population and demographic profile, which impacts future public expenditure and Exchequer revenue.

The paper also considers recent trends regarding migration and fertility at global, regional and national levels; the channels through which migration to and from Ireland flows; and the current systems and processes which govern migration to Ireland.

The research utilises a novel ‘bottom up’ approach to produce future net migration scenarios to develop a range of population projections. This approach disaggregates migrants into various categories, reflecting the different pathways through which people enter and leave Ireland, and applies migration rates based on historical averages, or, in some cases, shares of total population.

Analysis and Projections

• Globally, the flow and scale of international migration is reaching levels not seen in decades, with overall global migration figures at unprecedented levels. In 2023, migration to OECD countries reached 6.5 million new permanent immigrants, representing a 16 per cent rise on 2022 levels and a 28 per cent increase compared to 2019.
• In Ireland, net migration reached 79,300 on an annual basis (between April 2023 – April 2024), following elevated levels in the previous 12-month period (77,600). This represents a significant increase on pre-COVID trends (average of 37,700 per annum between 2016-2020). This is in part due to Ukrainians arriving under the Temporary Protection Directive, where 27,354 arrived between April 2023 – April 2024.
• Accounting for Ukrainian nationals, this increase has been primarily driven by unprecedented demand for employment permits and associated family reunification. While growing, international protection applications make up a relatively small share of net migration overall. In 2023, there were 13,220 international protection applications accounting for approximately 9% of total immigration.
• In the analysis’ medium scenario, where net migration shifts from c.40,000 to c.35,000 per annum over the next forty years, Ireland’s population would reach 6.77 million people in 2065, with labour force growth sustained until 2047.
• In the High scenario, where net migration shifts from c.58,000 to c.53,000 per annum over the time horizon, labour force growth is sustained over the same period with the population potentially reaching 7.59 million by 2065.
• In a Low scenario (net migration falls to c.18,500 per annum by 2065), Ireland’s population could reach 6 million in 2065 with the labour force contracting from 2041 onwards.
• In a scenario where there is no net migration in Ireland, our labour force would begin to fall in size from 2035 onwards, while the number of people aging out of the labour force will continue to grow. The potential economic consequences of such a fall would be very negative - posing major challenges for Ireland’s enterprise base, diminishing the capacity of the State to provide public services and infrastructure, constraining economic growth and ultimately reducing living standards.

Policy Considerations

Future Forty; Ireland’s Demographic Outlook identifies areas for further consideration including:

• Exit Rates - This analysis suggests that the emigration rate for certain migrant categories, such as Critical Skills Employment Permit Holders are relatively high, posing challenges from a fiscal, workforce and integration perspective.
• Labour Force Growth - In the medium scenario, Migration will be the sole driver of labour force growth in the long-run. Ensuring provision of services and infrastructure keeps pace with demographic trends is essential for maintaining Ireland’s appeal as a destination for highly skilled international talent.
• Increasing Dependency Ratio - In the paper’s medium scenario, the old-age dependency ratio (The proportion of persons aged over 64, relative to the working age population (15-64 years), is expected to increase from 23.1% in 2022 to 55.2% in 2065. This will have significant policy implications for pension sustainability, the working-age tax burden, labour market dynamics, and healthcare demand.
• Contingency Planning - 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 net migration and boost infrastructure capacity.
• Consistent Use of Population Projections - The consistent use of population projections across all public bodies would be useful for planning purposes. This would ensure that spending programmes are compared on a like-for-like basis and there is not a misalignment in priorities.
• Data - There are significant data limitations when it comes to understanding and forecasting migration trends in Ireland. The development of an integrated cross-departmental data system should be considered to allow for granular, real-time analysis of migration trends.

• Ireland and the global economy are set to face a number of potentially transformative challenges over the coming decades. Changes in demographic structures, migration flows, climate, and technology will have substantial cumulative impacts.
• Within the context of these global challenges, Ireland, as a small open economy, faces particular exposure to potential shifts in the nature and extent of global trade and investment. It also faces domestic pressures on the delivery infrastructure and public services from a combination of previous underinvestment and current capacity constraints. These challenges require multi-year, and in some cases multi-decade, policy approaches.
• Forward planning by governments is essential to ensure sustainability across the multiple domains of national prosperity, personal well-being and environmental standards. Maintaining a sustainable economy over the coming decades will require a coherent and integrated set of policies that address these challenges and also build resilience for unanticipated shocks.
• To inform and support the development of these policies, the Department of Finance has established ‘Future Forty’: a programme of research and analysis which examines the long-term sustainability of current policies and how various demographic, technological and other structural trends may affect Ireland’s economic and fiscal position over a forty-year period.
• Future Forty is a Department of Finance work programme undertaken on foot of recommendations from the Commission on Welfare and Taxation regarding efforts to: build on existing long-term fiscal analysis capabilities; examine different future public finance scenarios and how well the State could react to them; and analyse whether there are adequate policy tools and administrative systems in place to address potential outcomes.
• Net migration is the most unpredictable determinant of future population levels as well as the most impactful. Net migration flows have historically been underestimated in many advanced economies, including Ireland.
• This analysis takes a novel approach to projecting net migration in Ireland. The overall migration estimate comprises of twenty-two separate migration categories. These include various Employment Permit categories (both General and Critical Skills permit holders); Family Reunification categories; International Protection; EU (split between pre- and post-2004 accession Member States), UK; and Irish nationals.
• The projections presented in the paper are illustrative and show a range of possible net migration trajectories. No probabilities are assigned as to the likelihood of any of the scenarios occurring, they are purely designed to show what could happen in various scenarios, which are dependent on specific assumptions regarding immigration and emigration flows. Each scenario assumes that there will be no policy changes with regards to employment permits, International Protection or family reunification.

Future Forty: Ireland’s Demographic Outlook

Future Forty: Ireland’s Demographic Outlook - Presentation