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In [[economics]], [[geography]] and [[demography]] the '''dependency ratio''' is an age-population ratio of those typically not in the [[labor force]] (the ''dependent'' part) and those typically in the labor force (the ''productive'' part). It is used to measure the pressure on productive population.
 
==Formula==
In published international statistics, the dependent part usually  includes those under the age of 15 and over the age of 64.The productive part makes up the population in between, ages 15 – 64. It is normally expressed as a percentage:
:<math>(Total)\ Dependency\ ratio = \frac{(number\ of\ people\ aged\ 0-14\ and\ those\ aged\ 65\ and\ over)} {number\ of\ people\ aged\ 15-64} \times 100 </math>
 
As the ratio increases there may be an increased burden on the productive part of the population to maintain the [[child|upbringing]] and [[pension]]s of the economically dependent. This results in direct impacts on financial expenditures on things like [[social security]], as well as many indirect consequences.
 
The (total) dependency ratio can be decomposed into the child dependency ratio and the aged dependency ratio:<ref>[http://www.apheo.ca/index.php?pid=63 Association of Public Health Epidemiologists in Ontario]</ref>
 
:<math>Child\ dependency\ ratio = \frac{number\ of\ people\ aged\ 0-14} {number\ of\ people\ aged\ 15-64}  \times 100 </math>
 
:<math>Aged\ dependency\ ratio\ = \frac{number\ of\ people\ aged\ 65\ and\ over} {number\ of\ people\ aged\ 15-64} \times 100  </math>
 
== World Bank 2010 Age dependency ratio by country ==
As of 2010 Japan and Europe had high aged dependency ratios compared to other parts of the world.<ref>http://data.worldbank.org/indicator/SP.POP.DPND.OL/countries?display=map</ref>
 
== Inverse ==
The inverse of the dependency ratio, the '''inverse dependency ratio''' can be interpreted as how many independent workers have to provide for one dependent person (pension & expenditure on children)
 
== Issues ==
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.  The fewer people of working age, the fewer the people who can support [[school]]s, retirement [[pension]]s, [[disability pension]]s and other assistances to the youngest and oldest members of a population, often considered the most [[social vulnerability|vulnerable]] members of [[society]].
 
Nevertheless, the dependency ratio ignores the fact that the 65+ are not necessarily dependent (an increasing proportion of them is working) and that many of those of 'working age' are actually not working. Alternatives have been developed', such as the 'economic dependency ratio', but they still ignore factors such as increases in productivity and in working hours. Worries about increasing (demographic) dependency ratio should thus be taken with caution.<ref>http://www.eurofound.europa.eu/pubdocs/2012/59/en/2/EF1259EN.pdf</ref>
 
==Migrant Labor Dependency Ratio==
Migrant Labor Dependency Ratio (MLDR) is used to describe the extent to which the domestic population is dependent upon migrant labor.<ref>http://rspas.anu.edu.au/~athu/Journal%20Papers/International%20labou%2006.pdf</ref><ref name="Migration2008">{{cite book|author=International Organization for Migration|title=World Migration 2008: Managing Labour Mobility in the Evolving Global Economy|url=http://books.google.com/books?id=UllpLB1hwdIC&pg=PA440|accessdate=21 August 2012|year=2008|publisher=Hammersmith Press|isbn=978-92-9068-405-3|pages=440–}}</ref>
 
==See also==
* [[Demographic economics]]
* [[Economic collapse]]
* [[Employment-to-population ratio]]
* [[Generational accounting]]
* [[Pensions crisis]]
* [[Sub-replacement fertility]]
* [[Societal collapse]]
 
'''Case studies:'''
* [[Aging of Europe]]
* [[Aging of Japan]]
 
==References==
<references/>
 
==External links==
* [http://www.euphix.org/object_document/o5117n27112.html Old Age dependency Ratios in Europe]
* [http://www.economicshelp.org/dictionary/d/dependency-ratio.html Definition and Forecasts for Dependency Ratios]
*[http://www.newyorker.com/archive/2006/08/28/060828fa_fact ''The Risk Pool'', Malcolm Gladwell, The New Yorker, 8/23/2006]
 
[[Category:Demography]]
[[Category:Demographic economics]]
[[Category:Economic problems]]
[[Category:Retirement]]
[[Category:Ageing]]
[[Category:Public finance]]
[[Category:Government finances]]
[[Category:Government budgets]]

Revision as of 10:52, 27 February 2013

In economics, geography and demography the dependency ratio is an age-population ratio of those typically not in the labor force (the dependent part) and those typically in the labor force (the productive part). It is used to measure the pressure on productive population.

Formula

In published international statistics, the dependent part usually includes those under the age of 15 and over the age of 64.The productive part makes up the population in between, ages 15 – 64. It is normally expressed as a percentage:

(Total)Dependencyratio=(numberofpeopleaged014andthoseaged65andover)numberofpeopleaged1564×100

As the ratio increases there may be an increased burden on the productive part of the population to maintain the upbringing and pensions of the economically dependent. This results in direct impacts on financial expenditures on things like social security, as well as many indirect consequences.

The (total) dependency ratio can be decomposed into the child dependency ratio and the aged dependency ratio:[1]

Childdependencyratio=numberofpeopleaged014numberofpeopleaged1564×100
Ageddependencyratio=numberofpeopleaged65andovernumberofpeopleaged1564×100

World Bank 2010 Age dependency ratio by country

As of 2010 Japan and Europe had high aged dependency ratios compared to other parts of the world.[2]

Inverse

The inverse of the dependency ratio, the inverse dependency ratio can be interpreted as how many independent workers have to provide for one dependent person (pension & expenditure on children)

Issues

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. The fewer people of working age, the fewer the people who can support schools, retirement pensions, disability pensions and other assistances to the youngest and oldest members of a population, often considered the most vulnerable members of society.

Nevertheless, the dependency ratio ignores the fact that the 65+ are not necessarily dependent (an increasing proportion of them is working) and that many of those of 'working age' are actually not working. Alternatives have been developed', such as the 'economic dependency ratio', but they still ignore factors such as increases in productivity and in working hours. Worries about increasing (demographic) dependency ratio should thus be taken with caution.[3]

Migrant Labor Dependency Ratio

Migrant Labor Dependency Ratio (MLDR) is used to describe the extent to which the domestic population is dependent upon migrant labor.[4][5]

See also

Case studies:

References

  1. Association of Public Health Epidemiologists in Ontario
  2. http://data.worldbank.org/indicator/SP.POP.DPND.OL/countries?display=map
  3. http://www.eurofound.europa.eu/pubdocs/2012/59/en/2/EF1259EN.pdf
  4. http://rspas.anu.edu.au/~athu/Journal%20Papers/International%20labou%2006.pdf
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