‘There is no such thing’: what if the ageing crisis narrative is wrong?

In a bid to halt its population decline, Hungary is now offering mothers of four children a lifetime exemption from income tax.

South Korea is battling one of the world’s lowest fertility rates by offering “baby bonuses”: cash payouts to families having more children.

Even China, a country that spent much of the 20th century trying to curb its birth rate, has now adopted a pronatalist stance.

It ceased its famed one-child policy in 2015, transitioning to a two-child limit and later to a three-child limit.

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Countries are running scared from what they see as a demographic time bomb.

A cycle of fewer babies and longer lives is skewing the population in many western countries older, with potentially far-reaching consequences for dynamism, labour supply, pension coverage and healthcare provision.

The fertility rate needs to be 2.1 for an indigenous population to replace itself.

The Republic’s fertility rate was as high as four in the 1960s and 1970s, but has now dropped to 1.5, meaning our population is on course to decline without an influx from abroad.

In a scenario with a plausible pattern of immigration, the Department of Finance reckons the Irish population could climb to somewhere between 6.77 million and 7.59 million by 2065, up from 5.44 million in 2025.

In a report published last year, the department predicts that the State’s old-age dependency ratio – the number of retirees to workers – will increase from 23.1 per cent in 2022 to 55.2 per cent in 2065.

“This will have significant policy implications for pension sustainability, the working-age tax burden, labour market dynamics and healthcare demand,” it says.

Instead of having three to four workers for every retiree, we’ll soon have only one, creating what experts say will be a financial black hole at the heart of the exchequer.

Most countries believe increased levels of immigration could help, but mass immigration is already straining public infrastructure and polarising politics.

The country under the most severe ageing pressures is Japan.

Every minute in Japan, three people die, and 1.3 people are born. That means the population declines by 1.7 people every 60 seconds, by 2,448 each day and by 893,520 each year.

Statistics show Japan’s population declined by 908,574 to 120 million last year. On current trends, it will fall to 87 million by 2070 (a 27 per cent decrease).

Japan’s restrictive immigration regime, which favours short-term skilled workers, has compounded the problem, so now the country is spending trillions of yen on expanding child allowance and subsidising preschool.

But what if this demographic time bomb narrative is wrong?

In a recent Substack post, economist Cameron Murray suggests that immigration won’t resolve the ageing problem.

“Immigrants age at the same rate as the rest of us, and now we have a bulge in the age profile where most immigrants arrive, creating the same ‘pig in the python’ bulge that will age just like the baby boomers,” he says.

A substantial population bulge in Australia at ages 25-45 is due to migration over the past 10-20 years, which is a demographic bulge that will also age into retirement, like the baby boomers, doing nothing for the overall age profile long term, he says.

But Murray’s critique is more fundamental. He claims there is really no ageing crisis to be worried about at all and that’s because the experts have been looking at the wrong ratio.

The dire predictions, he says, are all based on age ratios which compare people of a working age (15-64) with people of a non-working age (14 and below, plus 65 and above).

These strict age categories, however, hide nuance.

Most 15- 19-year-olds are unproductive because they are still at school, while there are now more workers in the 65-and-over category than ever before; they even outnumber the 15-19 cohort.

If you look at economic dependency ratios – the actual workforce divided by the population – the situation isn’t that bad, he says.

“There are no age limits on working, so why not look at who is actually working? We are the oldest we have ever been on average. Has the sky fallen? Nope.

“Ageing has been a huge success. We live longer, healthier lives, and we spend them becoming more educated and working later but longer,” he says.

Murray says Japan, which has two, three, even four times more people aged over 65 compared to other countries, still has a comparable ratio of workers to the population as these other countries.

He also contends that GDP per capita is negatively related to population growth, meaning it falls as the population grows.

The crux of his argument is that ageing, up to this point at least, is heavily correlated with economic success globally.

Older countries are richer, he says, and any claim that we need to “do something about the ageing crisis should be carefully scrutinised, because there is no such thing”.