The Dependency Ratio is a ratio between dependents (children and pensioners) and the workers who support them. It's calculated by the following formula:
There has been a lot of panic recently about aging populations, but not much discussion of the total dependency ratio, which is the important metric. This leads to all sorts of policy distortions. For example importing workers is touted as a solution, but if that worker brings his three children with him, the dependency ratio worsens. Because those children need to go to school, have a doctor attend their colds and so on. Migrants only help if they are single people on a fixed one-off five year visa and they leave before they have children or get old.
Here is Britain's dependency ratio:
This means 1.77 people are supporting each dependent, which is tough.
Here's China's dependency ratio:
2.28 Chinese support each dependent. If you've been wondering why China has been outperforming the world, this is the reason. They've suppressed the number of children but their biggest generation hasn't yet reached retirement, so they're in a sweet spot with a light dependency burden, allowing them to outperform. Of course in 25 years time their bulge generation will be retired and their situation will be like Japan's.
Here's Japan's dependency ratio:
1.4 Japanese support each dependent. This is the reason Japan has struggled in the last twenty-five years - they're carrying a lot of dependents. However, there is light at the end of the tunnel after the grind of the last two decades. Japan's big post-war bulge population is beginning to pass away. In about fifteen years time the ratio should come down sharply as that big generation becomes history.
If having too many old people is a burden, so are too many children. Here is Ghana's dependency ratio:
1.39 Ghanaians support each dependent. It's the reason they're struggling to break out of poverty
What about the United States? Here is the superpower's dependency ratio:
You can see why the United States is struggling to impose it's will on China. Especially as the boomers are entering retirement en masse. It's not much comfort that China's stats will worsen considerably in fifteen years time when they could pull ahead of the US economically in the interim.