The Leaflet – The Looming Age Dependency Ratio Problem

Published August 6, 2015

The Looming Age Dependency Ratio Problem

The mainstream media keeps talking about budget deficits and potential tax increases, but what often goes unsaid is the many budget crises being experienced across the nation and around the world could get much worse due to the rapidly approaching demographic crisis known as the age dependency ratio problem.

The age dependency ratio is the number of people in a given group not able to work—typically older, retired people and those who are too young to work—compared to those who are often considered to be of working age.

The growing Baby Boomer population, coupled with an expanding population of very young children, is going to put a significant strain on the economies of many developed nations, greatly harming the ability of state governments to provide necessary services, especially those related to education. This is because the number of people needed to take care of those who are dependent is relatively small, with all signs pointing to the problem getting worse.

Health care for the aging and education for America’s youngest citizens together already compose the largest portion of state budgets, often accounting for more than 50 percent of expenditures.  Legislators are heading for some very difficult choices. Do they raise taxes on middle-income workers, possibly crushing the economy, or do they cut services to education, health care, or even both?


By 2030, 76 percent of the population will be dependent on 24 percent of the population. Currently, 41 percent of the population is supporting 59 percent. While these figures are daunting, there are options that could help improve education and reduce bloated budgets, including:

  • Student-based budgeting
  • Outcome-based education funding
  • School Choice

Ultimately, school choice is the most cost effective method to improve academic performance while holding down costs. Turn and Face the Strain, a new policy report by the Foundation in Excellence in Education (FEE), carefully examines the various problems facing legislatures around the nation and how free-market reforms in education can help solve them. You can see FEE’s state-by-state analysis online here.

Also, don’t forget The Heartland Institute will be hosting its Emerging Issues Forum–Midwest on September 25, 2015, in Chicago, Illinois, and it will hold its Emerging Issues Forum–South in Nashville, Tennessee on December 9. You can register for those events here!

Budget and Tax
Heartland Daily Podcast – Leonard Gilroy: Privatizing Public Needs
In this edition of the Heartland Daily Podcast, Jesse Hathaway, managing editor of Budget & Tax News, speaks with Leonard Gilroy at the Reason Foundation about the benefits of privatization. Gilroy talks about how privatization—allowing private-sector businesses to compete with government agencies to best serve the public’s needs—helps everyone. He says privatization provides many people with public goods and services, such as trash collection and recreational parks, more efficiently than most governments. When businesses compete with governments to provide cost efficient, high quality services, everyone is better off.

Energy and Environment
Research & Commentary: Are Solar Subsidies Leading to a New Bubble?
Although many industries in the United States have received substantial subsidies from the federal government, few have drawn as much criticism as the solar energy industry. While the renewable power industry as a whole is dependent on subsidies and laws requiring consumers to purchase its products, the solar power industry is more reliant on the government than even wind power.

In this Heartland Institute Research & Commentary, Senior Policy Analyst Matthew Glans discusses a new report from the Taxpayers Protection Alliance (TPA), which found the solar industry’s reliance on government handouts and risky financing schemes is creating conditions similar to other damaging, artificially created asset bubbles. The TPA report finds billions of taxpayer dollars wasted, billions more in financial investment and misallocated capital lost, homeowners unable to sell their homes due to bad solar lease contracts, and solar technology companies facing financial ruin if sales do not improve, leading to investor losses.

Number of Homeschoolers Increases Nationally
This story from School Reform News reports a booming home school market. “Parents choosing to home school their kids remain part of a growing movement across the country. According to a recent report in the National Catholic Register, the number of families now practicing some type of home education grew by 62 percent between 2003 and 2012. The report cites U.S. Department of Education statistics highlighting the swell of homeschoolers, as well as their reasons for seeking an alternative to traditional schools. Parents are choosing this course of action based on a variety of motives, including many that are significantly different from those in years past. Fewer today choose homeschooling for religious reasons, while more feel the quality of their child’s education will be better because of homeschooling … compared to traditional schooling, according to the report.”

Health Care
Legislative Pulse: Oregon
Health Care News interviews Rep. Julie Parrish (R-Tualatin), a member of the Oregon House of Representatives, about Obamacare and the Cadillac tax. According to Parrish, “The Cadillac tax is an excise tax on health care plans the federal government deems as being too generous. The tax goes into effect on January 1, 2018, and it will affect individual plans costing more than $10,200 and family plans costing more than $27,500. The tax is assessed on insurance companies, who will most certainly pass the tax through to the [policy holder’s] employer, including public employers. In a state such as Oregon, where public employee health care plans are very generous, public employers at all levels of government will likely be subject to this tax in 2018 if they do nothing.”

From Our Free-Market Friends
Study: Common Core Violates Federal Law
A new research paper by the Pioneer Institute, a free-market think tank based in Massachusetts, says Common Core standards, along with two testing consortia responsible for administering tests aligned with the standards, are in violation of multiple federal laws. The Pioneer Institute cites the Elementary and Secondary Education Act of 1965, the General Education Provisions Act of 1970, and the Department of Education Organization Act of 1970, which they say forbids federal control over curriculum and instruction. The goal of the research paper is to show why the federal government cannot favor a particular set of curriculum-content standards, according to its own established laws.




The July issue of Health Care News describes the 192-page American Health Care Reform Act, written by Reps. Phil Roe (R-TX) and Austin Scott (R-GA) as a plan that would replace Obamacare with patient-centered reforms and free-market solutions. Twila Brase, president of the Citizens’ Council for Health Freedom, said the bill “would not only expand choices for private health insurance, it would also give citizens more freedom and control over their health care dollars …”

Environment & Climate News

Budget & Tax News

School Reform News