The dependency ratio problem

Europe is aging rapidly. The big challenge of an aging population is the ‘dependency ratio’ i.e. an age-population ratio of those typically not in the labor force (the dependent part ages 0 to 16 and 65+) and those typically in the labor force (the productive part ages 17 to 64). It is used to measure the pressure on productive population and is a measure of the sustainability of a society.

How do you reverse the dependency ratio challenge facing Europe? Other than increasing the retirement age, options are a) have more children b) increase immigration. Birth rate seems to be in perennial decline across much of the developed world, so really the only other significant option is to increase the intake of foreigners who can boost the total active workforce. It’s an interesting dilemma to present to individuals who dislike ‘foreigners’. 

America has remained surprisingly young, but I think this is largely due to its historic openness in attracting the best of the globe by selling the ‘American dream’. With the United States increasingly becoming inward looking, how long before America starts to face the same challenge as Europe?

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