What is dependency ratio?

What Does dependency ratio Mean

The dependency ratio is known as the link between the number of people who are not active in terms of production and the number of productive individuals. The notion of dependency is linked to the fact that the former "depend" on the resources generated by the latter.

It is important to note that there may be confusion between this concept and the dependency relationship , which in some countries serves to describe the type of link that exists between a person and their employers, as opposed to the organization of those who work on their own account. , they do not have bosses. Nowadays, there is a growing tendency to be self-employed, which implies a greater investment of time and money.

Typically, this rate is calculated based on age: older adults, already retired, are not part of the labor market and, therefore, are not productive in economic terms. The same goes for children. The rest of the people, in theory, are productive.
This simplification, of course, leaves aside a large number of subjects who, despite being of the appropriate age to work, do not work and, therefore, do not produce economic resources .
To calculate the dependency ratio, it is necessary to divide the number of individuals who are not of productive age (it is usual to include in this group those under 15 years of age and over 65) by the number of productive individuals (those who have between 15 and 65 years).
For example: if in a city of 5,000 inhabitants , 1,200 people are between 0 and 14 or 66 years of age or older, and 3,800 people are between 15 and 65, the dependency ratio will be 0.31 . It is common for this ratio to be multiplied by 100 and expressed as a percentage . In this case, it could be said that 31 out of every 100 people are dependent.
The dependency ratio is important for the development of the public budget , since various social expenditures (such as pensions) are linked to this rate. The higher the rate, the greater the burden on the workforce.
This concept belongs to that peculiar group that, depending on the point of view from which it is analyzed, has very different meanings and weights. When the government of a city studies the dependency ratio, it sees numbers, potential sources of saturation in the labor market, lack of applicants for a particular position; When the people think about work and its relation to age, they make the decision to get their first job, to retire and begin to rest, or to continue working until their body tells them "enough".

In each country the employment situation is different, but there are also important differences between their regions, and the dependency ratio can yield the most diverse values ​​throughout the planet. For example, there are cities in which it is said that "there are no young people left", because they have gone to study elsewhere, and this presents a very particular problem, since if the local government only has elderly people, Considered "dependents", it does not have potential workers on hand to fill basic positions.
On the other hand, there are the communities in which, perhaps due to the difficulties of the economic situation, it is normal for people to work until their last days, without contemplating those two or three decades of rest that the brochures of some plans of employment promise. pensions. The dependency ratio in such a site will have fewer people dependent on the old age side than on the youth side.

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