Dependency Ratio Formula

Readers Question: What is dependency ratio? How this can be explained in term of ageing population. How is it linked to GDP?

The formula for the dependency ratio is:

Number of Children (0-15) + Number of Pensioners ( > 65 )
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Number of Working age 16-65

• The dependency ratio measures the economically inactive population compared to the economically active population.
• An ageing population means an increase in the number of people over 65 relative to the population. Therefore, the dependency ratio will rise. (In the UK, the dependency ratio is forecast to rise from 0.34 to 0.65 by 2040)
• An increase in the dependency ratio, may mean tax as a % of GDP needs to rise to meet the governments spending commitments on health, education and pensions.
• Europe’s ageing population is also worsened by the fact that falling birth rates mean a decline in the number of people of working age. However, this impact is slightly offset by – declining number of children and the recent rise in female participation.

For more details on the dependency ratio and its impact on Economies.

See also:

• Impact of an ageing population