Potential Support Ratio

Most governments must juggle budgets and confront the fact that the world has fewer people of working age to support the swelling ranks of the elderly. Joseph Chamie, a demographer, analyzes the Potential Support Ratio, or PSR, and suggests the statistic could reveal more about the overall health of an economy than GDP or other common indicators. “The PSR has weighty implications for governments and businesses concerning the labor force, taxation, education, housing, production and consumption, retirement, pensions, and health services,” Chamie writes. “The unprecedented shift towards a larger proportion of older persons and concomitant declines in workers is gradually and inexorably necessitating redesign of national economies.” In 1950, the world’s median age was 23, allowing about 12 people of working age per elderly individual; today the median age is about 30, with eight people of working age per elderly individual. Countries risk economic chaos by not planning ahead to the challenges of aging populations. Options include increased immigration, incentives on fertility, higher retirement ages, and reduced benefits in retirement and health care for the elderly.