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What is a Dependency Ratio?

The elderly are considered to be in the dependent part of a dependency ratio.
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  • Written By: Adam Hill
  • Edited By: Bronwyn Harris
  • Last Modified Date: 28 November 2014
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In each country of the world, there are people of every age and economic status, and those who are too old or too young to work often depend to a great degree on those who do work. It is beneficial for economists and other scientists to be able to express this fact in a mathematical way, and they do so through what is called the dependency ratio. Put simply, it means the ratio of unemployed to employed people in a country or organization.

To express a dependency ratio in exact terms, the dependent part usually includes those people under the age of 15, and over the age of 64. The productive part, for the sake of calculating the ratio, is then of course the population between the ages of 15 and 64. Most often, the result is expressed as a percentage. For example, if a population of 10,000 has 2,000 people under the age of 15; 5,000 people between the ages of 15 and 64; and 3,000 people over the age of 64, then the total dependency ratio comes out to 50%, since half of the population is older or younger than the productive part. It is sometimes useful to partition the ratio further into the youth or aged dependency ratio. In the above example, the youth dependency ratio would be 20%.

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This ratio is important for various economic considerations. As it increases, there can often be increased costs to the productive part of the population for the upbringing of the youth and maintenance of the pensions and social security system of the elderly. In countries facing aging populations, the dependency ratio and the phenomenon it describes are of great concern for this reason.

Many economists attribute a significant amount of a country’s economic success - or lack thereof - to the dependency ratio. For example, a country where there is a low number of workers compared to retirees will see its economy burdened because of having to support many retirees with few workers. A country with a rapidly declining birth rate, for instance, could experience this dilemma. However, economists say that a country with a birth rate that declines slowly will see its dependency ratio improve as larger numbers of children begin to enter the workforce. These ratios can be projected in advance, often by many years, based on what economists and other social scientists know regarding the predictable and observable paths of demographic trends.

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anon31173
Post 1

Can a low dependency ratio be a big thing as well? I mean, if you have too many working people, wouldn't you need to make sure that all of them are provided with jobs, and thus not left unemployed because competition is too fierce or there aren't enough jobs for them?

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