Dependency ratios overstate economic impacts of ageing

Significance

The standard measure of the challenge -- the ratio of the non-working-age population to those of working age -- can vary considerably from the actual number of non-workers to workers.

Impacts

• Demographic shifts might not depress GDP growth; Japan and Germany flourished when they had more dependents than workers.
• Attempts to shift the demographic trajectory through measures such as child subsidies have small effects, though they do improve welfare.
• If policies aid healthy ageing and efficiency, health spending need not surge; US Medicare spending per capita has been flat for a decade.