Ireland, in common with many developed countries, is facing the challenges of an ageing population - Leaving Cert Economics - Question e - 2013
Question e
Ireland, in common with many developed countries, is facing the challenges of an ageing population.
Discuss the possible economic consequences of an ageing populati... show full transcript
Worked Solution & Example Answer:Ireland, in common with many developed countries, is facing the challenges of an ageing population - Leaving Cert Economics - Question e - 2013
Step 1
Pressure on provision of state pensions
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Answer
The ageing population will increase the demand for state pensions as a larger segment of the population retires. This puts pressure on the government's budget. To mitigate this, the government may need to encourage private pension savings through tax incentives, thereby reducing reliance on state-provided pensions.
Step 2
Possible increased tax burden
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With a growing number of elderly people, the dependency ratio may rise, necessitating higher taxes on the working population. This could be implemented to fund services for older adults, including healthcare and social services.
Step 3
Increased government expenditure
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The government is likely to increase its expenditure on services for the elder population. This includes funding for healthcare services like medical care, transport, and nursing homes. Consequently, a significant portion of the budget may be allocated to these services.
Step 4
Changing pattern of demand
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The demand for specific goods and services that cater to older individuals will rise. This includes nursing homes, medication, and other healthcare services. As the population ages, various industries may need to adapt to meet this increased demand.
Step 5
The participation rate falls
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As the retirement age is approached, many individuals may wish to reduce their working hours or opt for part-time work. This impacts the overall labor supply, potentially creating labor shortages in specific sectors.
Step 6
Reduced mobility of labour
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Older individuals may seek to relocate for better employment opportunities. However, as they age, they may also be less willing or able to move, leading to a scarcity of labor in certain areas. This can affect regional economies and slow down economic growth.
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