The dependency ratio measures the percentage of dependents in a population, calculated by dividing the number of people under 15 and over 64 by those between 15 and 64. High ratios can create problems for social security and pensions. Economists can learn about a society by studying the ratio, which can indicate the number of people who work versus those who do not. The ratio can be divided into youth and elderly dependency ratios. The ratio does not always accurately represent economic dependency, as some people between 15 and 64 may be dependent.
The dependency ratio measures the fraction of dependents in a population. Dependents refer to people who are not in the labor force, such as those who are too young or too old to work. The ratio is always expressed as a percentage and is calculated by dividing the number of people under the age of 15 and over the age of 64 by the number of people between the ages of 15 and 64, and then multiplying by 100. The dependency ratio is becomes a source of concern in countries with an old-age dependency ratio, where there are large numbers of dependents, particularly those over 64 years of age. This raises problems for providing social security and pensions to those who have reached retirement age.
Economists can make several important discoveries about a society by studying its age dependency ratio. Of course, the number of people who work versus the number of people who do not work can be concluded. The high dependency ratios indicate that those who work have a greater responsibility than other countries to provide for their dependents. This help comes in the form of social security, taxes or shared income, in the case of parents who support their children.
The part of the ratio consisting of children is known as the youth dependency ratio, while the part of retired people is called the elderly dependency ratio. These two relationships can also be compared. For example, if a society has 10,000 people, and 2,000 are under the age of 15 and 3,000 are over the age of 64, the youth ratio is 66.7 percent (2,000 divided by 3,000).
The dependency ratio has this name because it indicates that those who are below or above the working age are dependent on those who work. Children under the age of 15 generally rely on their parents or guardians to support them financially, while older members of the population rely on government pension and assistance to financially support them in retirement. A part of the income of the active population goes to dependent people, either through income or taxes. The population dependency ratio does not always provide an accurate representation of economic dependency, as there are people between the ages of 15 and 64 who are dependent, such as unemployed or disabled, including the disabled and the mentally ill. Rather than using the dependency formula, a better way to get an idea of the number of dependents in a partnership is to calculate the number of people receiving disability benefits.
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