Dependency ratios: Useful policy-making tools?

Dependency ratios are derived from the proportion of so-called dependents in a society in comparison to the workforce. With an ever-increasingly aging society, governments need some form of projected measurements in order to plan for future spending. A dependency ratio is one tool that is employed for this purpose. However, there are many flaws in the use of this equation in terms of the assumptions made regarding the workforce, what is considered to be productivity, as well as changing economic outlooks over time. Older people are assumed to be a heterogonous group and are certainly considered to be dependent once the age of 65 is reached in many countries. With people living longer and maintaining better health into old age, it may be time to reconsider the use of dependency ratios. This paper discusses the problems with the current definition and uses of this demographic measurement.