Dependency Ratio

Definition

The dependency ratio is a measure used to show the ratio of non-working-age individuals (typically those under 15 and over 65) to the working-age population (ages 15 to 64). This ratio helps to understand the economic burden on the productive part of society and highlights how population distribution, age structure, and economic policies interact within a region.

5 Must Know Facts For Your Next Test

1. A high dependency ratio indicates that a large portion of the population is dependent on the working-age group, which can strain public resources and services.
2. Countries with aging populations typically have higher aged dependency ratios, which may lead to increased healthcare costs and pension burdens on workers.
3. The dependency ratio can significantly influence economic policies, including taxation and social welfare programs, as governments need to balance support for dependents with economic growth.
4. Regions with lower dependency ratios often have more robust economies because a greater proportion of their population is contributing to economic production.
5. The dependency ratio is not static; it changes over time due to factors such as birth rates, death rates, and migration patterns.

Review Questions

• How does the dependency ratio reflect the economic pressures faced by a country?
  • The dependency ratio serves as an indicator of economic pressure by revealing how many non-working-age individuals rely on the working-age population. A high ratio suggests that fewer workers are available to support the dependents, potentially leading to increased taxation or reduced public services. Conversely, a lower ratio indicates a greater workforce relative to dependents, which can ease economic pressures and foster growth.
• Evaluate the implications of an aging population on a country's dependency ratio and its economy.
  • An aging population raises the aged dependency ratio, which means that there are more elderly individuals depending on a relatively smaller workforce. This shift can lead to increased healthcare expenditures and pension liabilities, challenging government budgets and potentially stalling economic growth. Policymakers must find ways to address these challenges, such as encouraging higher birth rates or increasing retirement age, to maintain economic stability.
• Assess how changes in migration patterns might influence the dependency ratio in various regions.
  • Migration patterns can significantly impact dependency ratios by altering the demographic makeup of a region. For instance, an influx of young migrants can lower the overall dependency ratio by increasing the working-age population. In contrast, if a region experiences emigration of younger individuals while retaining an older demographic, its dependency ratio may rise, leading to greater economic strain. Understanding these dynamics is crucial for developing effective policies that address labor market needs and demographic shifts.

Related terms

Working-Age Population: The group of individuals typically considered able to work, usually defined as those aged between 15 and 64.

Youth Dependency Ratio: The portion of the dependency ratio that specifically measures the number of individuals aged 0-14 compared to the working-age population.

Aged Dependency Ratio: The segment of the dependency ratio that focuses on the number of individuals aged 65 and older relative to the working-age population.