Dependency ratio refers to the ratio of persons of ages under 15 years and over 64 years to the persons of ages 15-64 years. The persons below 15 years and above 64 years are defined dependent while persons between 15-64 years age are defined as economically productive.
Dependency Ratio is also sometimes called Total Dependency Ratio. It is made up of two different ratio viz. Child Dependency Ratio and Age Dependency Ratio.
Child Dependency Ratio
Child dependency ratio is the ratio of persons under age 15 to number of people aged 15-64.
Aged Dependency Ratio
Age dependency ratio is the ratio of persons above age 65 to number of people aged 15-64.
Important notes on Dependency Ratio
- A higher dependency ratio means that more and more people (children and aged) are dependent on the working population of a country.
- The higher dependency ratio necessitates the government to spend more on health, education, social security, age related pensions, disability pension etc.
- Higher dependency ratio is a feature of aging populations and populations with higher birth rate in comparison to death rates.
- The developing and least developed countries have tendency to show a higher dependency ration.
Thus, increasing dependency ratio brings more economic pressure on working population. As the ratio increases there may be an increased burden on the productive part of the population to maintain the means of livelihood of the economically dependent. This results in direct impacts on financial expenditures on things like social security, as well as many indirect consequences.