Dependency ratio

In economics, geography, demography and Sociology the dependency ratio theory is an age-population ratio of those typically not in the labor force (the dependent part ages 0 to 14 and 65+) and those typically in the labor force (the productive part ages 15 to 64). It is used to measure the pressure on productive population.

Dependency ratio is essential for all countries. It is one element that benefits the economy in growing during residents elderly age. It is recommended to have a moderate but stable ratio that helps the country prosper. In the article, “Minimizing the Dependency Ration in a Population with Below-Replacement Fertility Through Immigration ”, having an intermediate dependency ratio informs us that there are sufficient people in the working class who can support the dependent population. In return would provide better pensions and health care for residents. As a result, increasing fertility and allowing more immigration offers improvement on the economy. Immigration plays a major role on the economy.  Several individuals who migrate are the young working class who contribute to the workforce. Migration also benefits countries that are below the fertility replacement level. Which is the reproduction level of population that replaces itself from one generation to another. Therefore, having working age immigrants help increase the number of people who can sustain the dependent groups.

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:

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:

As of 2010, Japan and Europe had high aged dependency ratios compared to other parts of the world. In Europe 2010, for every adult aged 65 and older there are approximately four working age adult (15-64), which is expected to decrease by 2050 with a ratio of two to one. The implications of an aging population are declining in fertility and longer life expectancy. The average life expectancy of males and females are expected to increase from 79 years in 1990 to 82 years in 2025. The dependency amongst Japan residents aged 65 and older is expected increase. Which will have a major impact on Japans’ economy.

...
Wikipedia