Central Bank Chief Warns: Work Beyond 66 to Maintain Living Standards

URGENT UPDATE: Central Bank Governor Gabriel Makhlouf has issued a stark warning: individuals may need to work beyond the current retirement age of 66 to sustain living standards in the face of demographic shifts. Speaking at an OECD meeting in Paris, Makhlouf emphasized that an ageing population and declining fertility rates will significantly impact employment growth across the Euro area in the coming decades.

This announcement comes as the Euro area braces for a projected decline of 1.5 million people in the working-age population, intensifying the pressure on individuals to remain in the workforce longer. Makhlouf highlighted that the “old-age dependency ratio”—the proportion of those aged 65 and over compared to the working-age population—is expected to rise sharply by 2050.

During his remarks, he stated, “We need to look beyond the traditional definition of working-age population as 15-60/64 years of age and boost participation in the post-60/65 population.” With life expectancies in Ireland currently averaging 84 years for women and 81 years for men, many may find themselves facing nearly two decades of retirement without the financial means to support their lifestyle.

Makhlouf noted that while migration could provide a partial solution to these challenges, it will not suffice to fully address the impending demographic shifts. He pointed out that “the extent to which migration can help mitigate the demographic and growth drag from ageing populations” is uncertain, but necessary for future planning.

Looking ahead, the governor warned of a potential cooling in the labour market, driven by both global shocks and long-term demographic factors. “Between 2024 and 2027, the euro area working-age population is projected to fall by 0.7%,” he said, underscoring the urgent need for policies that enhance labour force participation and productivity.

As the population ages, Makhlouf emphasized that older individuals tend to consume more healthcare and age-related services, potentially placing upward pressure on wages and inflation in those sectors. He added, “An older population with lower consumption and higher savings could place downward pressure on aggregate demand, limiting price growth in certain sectors.”

This evolving scenario raises critical questions about how individuals and governments will adapt to a world where working longer becomes a necessity. With the current state pension in Ireland kicking in at 66, many may face difficult choices regarding their retirement plans.

Makhlouf’s comments come at a crucial time, urging immediate attention to these demographic challenges. As the EU navigates through these turbulent waters, the implications for individuals, families, and the broader economy will be profound.

Stay tuned for further updates on this developing story, as more details emerge about the future of work and retirement in the Euro area.