Dependency Ratios


You can also find this at Prof.Jim Heskett’s Column on Harvard Business School Working Knowledge Website. This is my response to the question on Dependency Ratio.

A fundamental flaw in the calculation of Dependency ratios – they consider age and not productivity as the criteria.

Human survival is based on a simple ecosystem where the producers need to match consumption.

In Asian society, senior citizens remain productive until very late stages of life. They become caretakers for grandchildren, advisors on various issues & even the backbone support for commercially productive children. This enables the adult children to remain very productive at their roles in the organisation. I can vouch for the fact that more than 50 percent of working couples in India depend on their retiree family members for a lot of aspects!

The notion that retirees should become unproductive is largely fostered in the developed nation because of the large sums of assured retirement payments & health benefits. A long life need not be a medical insurance dependent life! But that is how it is because of the current unsustainable lifestyles of many citizens.

Retirement benefits should remain ‘benefits’ and not become ‘assurances’! The retirees cannot be and should not assured of benefits that current economics cant support! Assured retirement benefits create complacency and disincentive for financial education.

The Plan of Action for Corporates:
1. Provide Health Awareness training for employees and encourage healthy lifestyles.
2. Do not retire employees – treat them as part of an extended family where their services may be required.
3. Respect employees’ financial judgement -Educate them on financial tools and options. Make proportionate contributions to their investments

The Plan of Action for Governments
1. Invest in continual education for citizens – An educated citizenry is a productive citizenry.
2. Create social security as a protection mechanism only and not as an investment option – Excessive social security creates complacency that can harm a nation in the globalised world.
3. Encourage citizens and create mechanisms that provide large payoffs to those that develop more complex skills.

Dependency ratios need to converted to interdependency actions. A vibrant society & organisation learns from its past and invests in the future!

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~ by exploreamaze on October 22, 2006.

One Response to “Dependency Ratios”

  1. how is this useful to any of us anyways

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