Dependency ratio

Consideration of the dependency ratio is essential for governments, economists, bankers, business, industry, universities and all other major economic segments which can benefit from understanding the impacts of changes in population structure.

This results in direct impacts on financial expenditures on things like social security, as well as many indirect consequences.

As of 2010, Japan and Europe had high aged dependency ratios (that is over 65 as % of workforce) compared to other parts of the world.

A high dependency ratio can cause serious problems for a country if a large proportion of a government's expenditure is on health, social security & education, which are most used by the youngest and the oldest in a population.

Alternatives have been developed', such as the 'economic dependency ratio', but they still ignore factors such as increases in productivity and in working hours.

[11] While OADRs or LFDRs provide reasonable measures of dependency, they do not account for the fact that middle-aged and educated workers are usually the most productive.

Interestingly, while OADRs or LFDRs can change substantially, the PWLFDR is predicted to remain relatively constant in countries like China for the next couple of decades.

PWLFDR assessments recommend to invest in education and life-long learning and child health to maintain social stability even when populations age.

If the demographic population continues to follow this trend, their savings will decrease while their long-term interest rates increase.

This will stimulate a higher economic growth because the working-age population will grow in number if more young adults migrate into their country.

The increase in the involvement of women in the work force has contributed to the working-age population which complements the dependency ratio for a country.

A consequence from PWLFDR assessments is the recommendation to invest in education and life-long learning, child health, and to support disabled workers.

[12] For this reason, the Office of the United Nations High Commissioner for Human Rights has characterized the metric as ageist, and recommends avoiding its use.