Calculating the Dependency Ratio

AP Human Geography

Retired Dependents

Retired Dependents

Workforce Workforce

Child Dependents

Child Dependents

Source US Census Bureau International Data Base

Dependency Ratio• The ratio between the number of dependants (anyone above

or below the working age) and the number of people in the potential labor force.

• young dependents (YD): Anyone younger than 15• old dependants (OD): Anyone 65 and older

• Dependency ratio = YD + OD x 100 People of working age

Calculating Dependency Example• Dependency ratio = YD + OD x 100

People of working age

YD= 500OD= 250 People of working age = 600

• Dependency ratio = 500 + 250 x 100

600Dependency Ratio = 125 (which means that for

every 100 workers, there are 125 not working)

Importance of Dependency Ratio

• It’s important because it shows the ratio of economically inactive compared to active.

• Economically active will pay much more income tax

• Economically inactive (dependents) are bigger recipients of government spending (education, pensions and health care)

Forecast for Dependency Ratios

Solutions for Higher Dependency Ratios

• Raising retirement age in line with longer life expectancies

• Encouraging immigration of people in early 20s and 30s

• Reduced government funded pensions and encouraging private pensions (401K/403B)

Costs and Benefits of Ageing and Youthful Populations

Ageing Populations

Causes Life expectancy has increased, causing increased proportions of elderly

Costs 1. Heavy Burden on state finances through pensions and welfare payments.

2. Large demands on health systems 3. Reduced workforce 4. Population decline- if there’s also

declined birth rates Benefits 1. Workforce can work longer

2. Elderly can help look after grand-children which allows parents to work full-time.

Youthful Populations

Causes Many LEDCs are have high birth rates. Costs 1. High demand for education.

2. Need for many women to stay at home to care for children

3. High rates of unemployment4. Increased poverty- more people are

born into families, which are already poor.

Benefits 1. Large potential workforce often leading to cheap labor, which can attract new investment.

2. Less money is spent on healthcare.

Guided Practice

• Use the Age/Sex Structures for Area A and B to complete the questions on the back to ultimately calculate the dependency ratios for both areas.

• Raise your hand if you need help.