The world is getting older: more than three quarters of countries will either be ageing or already aged by 2050

The following figures show the projected proportion of the population aged 65 years and over in the total population at country level for the years 2020 (figure 1 (a)), 2030 (figure 1 (b)) and 2050 (figure 1 (c)). Drawing from Oizumi et al. (2006), a country is categorized as an “aged” society when the share of persons aged 65 years and over reaches 14 per cent or more of the total population, as “ageing” when it accounts for between 7 and 14 per cent, and as “not aged” when it constitutes less than 7 per cent of the total.

Figure 1. Global ageing status in 2020, 2030 and 2050: share of population aged 65 and over in total population

(a) Global ageing status in 2020 (share of population aged 65 and over in total population)

(b) Global ageing status in 2030 (share of population aged 65 and over in total population)

(c) Global ageing status in 2050 (share of population aged 65 and over in total population)

Source: calculations based on UNDESA World Population Prospects 2019.

In 2020, 54 countries are classified as aged societies, most of them developed countries (72 per cent), while another 42 predominantly emerging countries (79 per cent) are deemed to be ageing. By 2030, 51 countries will be ageing and 67 will be aged; in 2050, the ageing phenomenon will have progressed further, with 36 ageing and 111 aged societies. As a result, the number of countries immediately concerned by population ageing will increase significantly from 96 in 2020 to 147 in 2050 – that is, more than three quarters of all countries and around 87 per cent of the global population. The 16 most aged countries will have very high shares of older persons, who will account for more than 30 per cent of the total population. Sub-Saharan Africa will be home to the world’s most youthful populations, since more than 85 per cent of the region’s countries will not have begun this demographic transition, while Europe and Central Asia will have the oldest populations, as almost 92 per cent of countries in the region will have aged (see Annex, table A1 for a detailed overview by region).

The latest UNDESA (2019b) population projections to 2050 indicate that the global population will reach 9.7 billion, with major increases in emerging and developing countries (see figure 2). Overall, the numbers of women and men are about equal, although the female–male ratio is slightly smaller in emerging countries, with around 97 women per 100 men. At older ages, women outnumber men owing to their longer average life expectancy (UNDESA 2019a). However, the projected rise in life expectancy for men, which reflects improvements in economic and health conditions, will rebalance this situation over time, especially in developed countries.

Figure 2. Total population (in billions) and female/male ratio, 2000–50

Source: calculations based on UNDESA World Population Prospects 2019.

The vast majority of persons aged 55 years and over will be located in emerging countries, where almost 1.9 billion persons will be over 55 years of age in 2050 (see figure 3). However, the strongest increase in the over-55 population is expected to be seen in developing countries, where it will almost triple between 2020 and 2050 from a small base in absolute numbers. Over the same period, the over-55 age group will double in emerging countries and grow by a factor of 1.3 in developed countries. Compared to the total population, the share of the older cohort will be highest in developed economies (40 per cent), followed by emerging (28 per cent) and developing countries (14 per cent).

Figure 3. Population aged 55 years and over (in millions), by sex and income group, 2000–30

Source: calculations based on UNDESA World Population Prospects 2019.

The proportion of older workers in the labour force is increasing worldwide

As a direct consequence of the population ageing process, there will be a growing number of older workers in the future labour force. It is common practice to define older workers as the share of the labour force aged 55 years and above (Samorodov 1999). Current data and projections show increasing trends in these numbers (see figure 4).

Figure 4. Composition of the labour force (in billions) and share of older workers, by sex and income group, 2000–30

Source: calculations based on ILO LFEP database, July 2019 update.

Indeed, the labour force aged 55 years and over will grow consistently, with the highest growth rate occurring between 2020 and 2030 in developing countries (40 per cent), followed by emerging (28 per cent) and developed countries (14 per cent).

Emerging countries account for the highest absolute number of older workers: by 2030, some half a billion workers will be over the age of 55 years, accounting for around 18 per cent of the total labour force.

Around one quarter of all workers in developed countries will be over 55 years of age in 2030, making this the group with the largest share of older workers in the total labour force globally.

The picture is slightly different for developing countries, where both the absolute numbers and the shares of older workers remain modest but are projected to rise steadily over the coming years to reach 48.5 million, or 12 per cent of the labour force, by 2030.

Although there are no major gender differences in the expected increase in the proportion of older workers in the total labour force, there is a considerable levelling effect between women and men. Despite women making up the majority of the total over-55 age group (see figure 2), women’s participation in the labour force will continue to be lower than men’s. This trend holds true for developed and emerging countries alike.

Trend reversal in older workers’ labour force participation rates across development level

Breaking down the labour force participation rates (LFPRs) of older persons by age group reveals some interesting patterns. An early study of the LFPRs of older workers in 151 countries concluded that “countries with high national income per capita tend to have lower participation rates for older men and women” (Clark and Anker 1990, 21). As shown in figure 5, this pattern seems to be changing. While LFPRs are decreasing in developing countries, they are strongly increasing in developed countries, where they will overtake the levels seen in developing countries by 2030. In emerging countries, these rates are only falling for the 65 years and over cohort, remaining relatively stable for the other age groups.

Figure 5. Labour force participation rate (in %) and gender gaps (percentage points), by income and age group, 2000–30

Source: calculations based on the ILO LFEP database, July 2019 update.

The decrease in LFPRs in developing countries can be attributed to the advances made in terms of pension system coverage and other social transfer systems (ILO 2017b), which gives older workers greater choice in deciding whether to remain in the labour market. Even so, the share of older workers in the labour force remains high in these countries: many work in the informal economy (ILO 2018b) and are not covered by any social protection benefits that would enable them to stop working while still receiving an income.

The increase in LFPRs in developed countries can be explained by two main factors. First, several countries have raised the statutory retirement age in recent decades, a trend that is likely to continue (OECD 2017). This translates almost automatically into a longer working life (Vogel, Ludwig and Börsch-Supan 2017). Second, the implementation of employment policies that promote active ageing, foster the retention and recruitment of older workers by enterprises, and address age discrimination has succeeded in keeping more workers aged 55 years and over in the labour market.

Gender gaps in labour force participation rates are high across all levels of development, reflecting the persistence of occupational and sectoral gender segregation and the uneven distribution of unpaid household and care work, even at older ages (ILO 2016a).

In developing countries, the gender gap in labour force participation lingers at around 20 percentage points across all age categories. Emerging economies reveal the highest gaps in LFPRs for workers aged 55 to 59 years (around 38 percentage points) and 60 to 64 years (around 30 percentage points). The gap is expected to decrease for workers aged 60 years and over but will remain high for those aged 55 to 59 years.

In developed countries, equal access to education, anti-discrimination laws and activation policies, such as the provision of childcare and maternity benefits, have enabled and encouraged women to participate in the labour market. The consequent narrowing of the gap in LFPRs is most significant for the 55 to 59 years age group, where it is expected to drop by 12 percentage points by 2030, compared to a projected decrease of five percentage points for the 60 to 64 years cohort. However, the gap is expected to increase slightly for workers aged 65 years and over.

The demographic dependency ratio

The demographic dependency ratio is the most commonly used measure of dependency. The young-age dependency ratio reveals the number of persons below the age of 15 years compared to those aged 15 to 64 years, while the old-age dependency ratio shows the proportion of persons aged over 64 years relative to those aged 15 to 64 years. The sum of both ratios is the total demographic dependency ratio (DDR).

where:

• working-age population is the number of persons aged 15 to 64 years;

• non-working-age population is the number of persons aged 0 to 14 years and those aged 65 years and over.

This ratio assumes that children and the elderly are economically dependent upon persons aged 15 to 64 years. As the ratio increases, there may be an increased burden on the population in the labour force in order to maintain the upbringing and pensions of economically dependent persons.

In developing countries, the total demographic dependency ratio decreased from 0.93 in 1991 to 0.81 in 2020 and is expected to further decrease to 0.72 by 2030 (see figure 6). This is due to a significant reduction in the child dependency ratio, although the old-age dependency ratio has been increasing slightly over time.

In emerging countries, the total demographic dependency ratio decreased by one quarter from 0.66 in 1991 to 0.50 in 2015 owing to a decline in the share of children in the total population. Since 2015, the ratio has remained stable and is expected to stay that way to 2030 due to a growing older population, which will offset the decrease in child dependency.

Developed countries experienced a slight decrease in the total dependency ratio – from 0.50 in 1990 to 0.49 in 2010 – largely driven by a shrinking younger population. Since 2010, the total ratio has started to rise again and is poised to grow by one quarter to the year 2030. This increase can be almost entirely explained by a rapidly ageing society, with the further shrinking of the child dependency ratio playing a minor role.

Figure 6. Demographic dependency ratio (DDR), by income group, 1991–2030

Source: calculations based on the ILO LFEP database, July 2019 update.

The DDR provides a good starting point for forecasting and discussing dependency burdens, especially in the context of shrinking youth and growing older populations worldwide. Its calculation is straightforward and requires only basic demographic information (i.e. age and sex) to be available for almost all countries. Moreover, the composition of the population changes slowly. This indicator therefore allows for accurate short- and medium-term projections of the data, especially with regard to the population aged 15 years and over.

However, there is no universal definition of the working-age population. The age thresholds usually correspond to societal standards for education and work eligibility and are anchored in national legislation. In order to enable international comparability, the ILO usually defines the working-age population as all persons aged 15 years and older. Furthermore, the demographic dependency ratio ignores the actual economic behaviour of persons aged between 15 and 64 years, such as age of entry to and exit from the labour market, employment status, and level of labour income. Instead, this ratio simply assumes fixed age limits in the labour markets and does not allow for a more sophisticated economic interpretation.

Dependency measures based on employment

Activity-based dependency ratio

The first alternative measure of dependency is based on the economic activity status of the working-age population. Not everyone of working age is part of the labour force (i.e. working or available and seeking work) for a variety of reasons: young people may still be in school; adults may have taken early retirement or have chosen to stay at home due to care responsibilities, such as childcare or elderly care; while others may not work for reasons of disability or long-term illness, or because they simply do not wish to work.4

This alternative dependency measure, called the activity-based dependency ratio (ABDR), restricts the “universe” of persons that support dependents to those that are in the labour force, namely all employed and unemployed persons, thus excluding those persons of working age who are not covered by these two statuses. As a result, the dependent population for the ABDR consists of: (a) children below the age of 15 years, (b) persons aged 15 to 64 years who are outside the labour force, and (c) older persons aged 65 years and over.

where:

• non-working-age is the number of persons aged under 15 years or over 64 years;

• outside the labour force is the population aged 15 to 64 years that is not engaged in the labour force, i.e. neither employed (in paid employment or in self-employment) nor unemployed;

• labour force is the population aged 15 to 64 years that is engaged in the labour force, i.e. either employed or unemployed.

We divide the ratio into six sub-ratios based on the characteristics of the inactive population: a child dependency ratio (under 15 years of age); a sex-disaggregated dependency ratio for the youth population (aged 15 to 24 years) outside the labour force; a dependency ratio for the adult population (aged 25 to 64 years) outside the labour force, for both women and men; and an elderly dependency ratio (aged 65 years and over). This breakdown allows us to gain a more detailed picture of those working-age persons who are outside the labour market and are therefore likely to be dependent upon the support provided by those who are in the labour force.

As shown in table 1, the activity-based dependency ratio (ABDR) is much higher than the total demographic dependency ratio (DDR) for all three income groups. When all those who are outside the labour market are included, economic dependency doubles on average in developing and developed countries – by a factor of 1.9 and 2.0 respectively – and increases by a factor of 2.7 in emerging countries in 2020. This strong divergence between the two measures highlights the inaccuracy of the DDR as an indicator of economic dependency.

The ABDR is highest in developing countries (see figure 7). It remained stable between 1991 (1.56) and the early 2000s (1.55), at which point it started to fall, with the exception of a slight peak in 2010, probably in the aftermath of the 2007–08 global financial crisis. The ABDR for developing countries is expected to reach 1.41 in 2030. The main determinant of the ABDR in these countries remains the very high child dependency rate, which has been decreasing since 1991. The elderly dependency ratio is small: many of the countries in this group have not yet entered the ageing phase and will only do so in around 2030 (see Chapter 1). The other sub-ratios – youth and adults outside the labour force, disaggregated by sex – are also relatively small, illustrating the fact that, in the absence of any form of social protection, all those who are capable of working can and do undertake some form of economic activity. When it comes to gender, it is interesting to note that the share of adult women outside the labour force is on average three times higher than that of men. This could reflect the uneven distribution of household and care responsibilities between women and men, including at younger ages.

The ABDR in emerging countries fell from 1.36 in 1991 to 1.27 in 2005, mainly because of the sharp decrease in the child dependency ratio. However, it has been increasing ever since and is projected to reach 1.40 in 2030, just above the 1991 rate. While the increasing elderly dependency ratio is certainly the strongest driver of this change, the share of persons outside the labour market is also on a clear upward trend. This trend is most pronounced for adult women who are more likely than adult men to be outside the labour force.

Although the ABDRs in emerging and developing countries are expected to converge by 2030, the ABDR in emerging countries tends to be slightly lower than in developing countries because of a considerably lower child dependency ratio. At the same time, this effect is partly offset by higher income levels and better social protection systems, which enable people to remain outside the labour market if they so wish.

In developed economies, the ABDR decreased from 1.14 in 1991 to 1.08 in 2010 and started rising again as of 2015 to reach 1.18 in 2030 – slightly higher than the level in 1991. While child dependency is declining, the elderly dependency rate has increased sharply since the 1990s, overtaking the child dependency ratio around the year 2015. The proportion of women outside the labour force has been decreasing significantly since 1991, a trend that is expected to continue, albeit at a slower pace. While this increase in the women’s activity rate partly explains the fall in the ABDR, it is not sufficient to counterbalance the sharp rise in the elderly dependency ratio.

Figure 7. Activity-based dependency ratio (ABDR), by income group, 1991–2030

Source: calculations based on the ILO LFEP database, July 2019 update.

The ABDR provides a finer measure of economic dependency than the demographic dependency ratio. By factoring in the effective labour market participation of working-age persons, disaggregated by sex and age group, it provides analysts and policymakers with more detailed information about how labour market participation levels influence dependency rates.

Since it is based on basic demographic and labour market information, data is available for a large number of countries and enables cross-country comparisons to be made. However, the simplicity of the data requirements, and in particular the binary nature of either being inside or outside the labour force, comes at a price: the ABDR does not provide any indication of the quality of employment for those persons who are in the labour force or any rationale as to why other persons are outside the labour force. Furthermore, it counts unemployed persons as non-dependents, which is misleading. Even assuming the existence of effective social security systems, such as unemployment benefits, unemployed persons are receiving transfers from other groups in society. And where such systems do not exist, even when unemployed persons draw on personal savings, they usually still depend on family members for their basic needs.

Employment-based dependency ratio

Our second employment-based alternative measure of dependency includes unemployed persons as dependents, in addition to persons outside the labour force. It thus assumes that those who are unemployed benefit from transfers from those who are employed. Such transfers can either be direct – through intrahousehold reallocations, for example – or indirect, such as through social security or public redistribution schemes. The denominator of the employment-based dependency ratio (EBDR) is limited to the employed population, while the numerator, or the dependent population, consists of: (a) children below the age of 15 years, (b) persons aged 15 to 64 years who are outside the labour force, (c) all unemployed persons aged 15 years and over, and (d) older persons aged 65 years and over.

where:

• non-working-age is the number of persons aged under 15 years or over 64 years;

• outside the labour force is the population aged 15 to 64 years that is not engaged in the labour force;

• unemployed is all persons aged 15 years and over5 who are seeking and are available to start working for pay or profit in specified reference periods;

• total employed is all persons aged 15 to 64 years who are in work, either in paid employment or in self-employment.

We divide this ratio into eight sub-ratios based on the characteristics of the inactive population and the unemployed: a child dependency ratio; a sex-disaggregated dependency ratio for the youth population (aged 15 to 24 years) outside the labour force; a dependency ratio for the adult population (aged 25 to 64 years) outside the labour force, for both women and men; an unemployed ratio, also for women and men; and an elderly dependency ratio. This enables us to see the proportion of employed persons that is providing support to the other cohorts.

As table 1 shows, the employment-based dependency ratio (EBDR) is higher than the activity-based dependency ratio (ABDR), although the difference is small. This is mainly a reflection of relatively low shares of unemployed persons compared to persons outside the labour market, especially in emerging and developed countries.

In developing countries, the EBDR remained stable at around 1.6 until 2015, when it started to decrease and is expected to fall to 1.52 in 2024 (see figure 8). The demographic component (child dependency and elderly dependency) clearly drives the dependency ratio, especially the child component. The addition of unemployed persons to the group of potential dependents plays only a minor role.

In emerging countries, the EBDR decreased from 1.43 in 1991 to 1.37 in 2010. It has been increasing ever since and is expected to reach 1.45 in 2024. The demographic component is behind this trend: there has been a strong decline in the child dependency ratio throughout the entire period and a marked increase in the elderly dependency ratio since 2005. Hence, ageing is and will continue to be an important determinant of dependency in these countries. Unemployment also plays a more pronounced role in this group of countries.

In developed countries, the EBDR has been fluctuating at around 1.22, reaching a low of 1.13 in around 2020. The latest projections suggest a slight tendency upward between now and 2024. The demographic component accounts for some three quarters of the dependency ratio, with the elderly component increasingly gaining in significance. Unemployment constitutes the smallest contributing factor.

Figure 8. Employment-based dependency ratio (EBDR), by income group, 1991–2024

Source: calculations based on the ILO LFEP database, July 2019 update.

The EBDR offers valuable insights into the composition and distribution of potential dependents. From a conceptual point of view, it makes sense to include unemployed persons in the group of dependents. In addition to the problems discussed in relation to the ABDR in the previous section, however, the EBDR suffers from a major shortcoming in the data: both the employment and unemployment rates are influenced by a large variety of factors that make it difficult to predict trends accurately, especially for the more distant future.6 While the explanatory power of the EBDR decreases for distant future predictions, it may still be an adequate indicator for policymakers to assess labour market needs in the nearer future. Nevertheless, the EBDR does not give any indication of the job quality of those in employment and assumes them to be non-dependents.

Table 1: Comparison of demographic-, activity-, and employment-based dependency ratios, by income groups, 2000-2030

Notes: DDR: demographic dependency ratio; ABDR: Activity-based dependency ratio; EBDR: Employment-based dependency ratio.

Projections of employment and unemployment figures based on econometric models are only available to the year 2024. As a result, estimates for the EBDR are not included for all years.

Interpretation: A ratio of 1.5 of the EBDR, for instance, can be interpreted as meaning that 15 persons not in employment (i.e. children below the age of 15 years, persons aged 15 to 64 years outside the labour force, unemployed persons aged 15 years and over, and older people aged 65 years and over) are thought to be economically dependent upon 10 persons in employment.

Source: calculations based on the ILO LFEP database, July 2019 update.

Dependency measures based on productive employment

In the following section, we are introducing three indicators based on the notions of full-potential and productive employment. Full-potential employment reflects the ability of an economy to utilize the available human resources to the full extent. Productive employment is defined as “employment yielding sufficient returns to labour to permit the worker and her/his dependents a level of consumption above the poverty line” (ILO 2012).

Labour underutilization as a proxy for non-productive employment

Even when workers are in employment, they may find themselves in a situation where they wish to work more paid hours; that is, they are time-related underemployed. The income generated by such involuntary part-time employment may not be sufficient to cover basic needs and may be a cause of in-work poverty (Warren 2015; McBride, Smith, and Mbala 2018). Alongside the unemployed and the inactive populations, persons in time-related underemployment form the underutilized labour force group. If we define productive employment as employment that generates an income sufficient to keep workers and their families above the poverty line, then we can use the labour underutilization indicator as a proxy for non-productive employment.

This alternative dependency measure can therefore be defined as the labour underutilization dependency ratio (LUDR), where the denominator is those persons who are fully employed – all employed persons who are not in time-related underemployment – and the numerator comprises the following dependents: (a) children below the age of 15 years, (b) persons aged 15 to 64 years who are outside the labour force, (c) all unemployed persons aged 15 years and over, (d) older persons aged 65 years and over, and (e) time-related underemployed persons aged 15 years and over.

where:

• non-working-age is the number of persons aged under 15 years or over 64 years;

• outside the labour force is the population aged 15 to 64 years that is not engaged in the labour force;

• unemployed is all persons aged 15 years and over who are seeking and are available to start working for pay or profit in specified reference periods;

• underemployed is all persons in employment who want to work additional hours, whose working time in all their jobs is below a specified threshold of hours and who are available to work additional hours if they are given the opportunity to do so;

• full-potential employment is the total number of employed persons minus the underemployed.

The breakdown of the LUDR follows the same metrics as the EBDR but includes involuntarily underemployed women and men. As expected, this increases the dependency ratio across all income levels (see table 2), most notably in developing countries, where it is on average 25 per cent higher than the EBDR. This reflects the reality of many workers in developing countries who cannot afford to be without employment and hence accept any kind of work, often with piece-rate or daily contracts.

The LUDR in developing countries is projected to decrease from 2.0 in 2015 to 1.9 in 2024 (see figure 9). The contribution of the time-related underemployed to the overall dependency ratio remains stable at levels that are much higher than for unemployment. Thus, underemployment is a more relevant indicator of dependency than unemployment in developing countries.

The LUDR in emerging countries is increasing and is expected to reach 1.56 in 2024. This increase is largely being driven by population ageing, while the underemployment share is shrinking. Men seem to be more affected by time-related underemployment than women.

The LUDR is lowest in developed countries, where it is trending upward and is projected to reach 1.23 in 2024. Women are on average a third more likely to be in involuntary part-time employment than men.

Figure 9. Labour underutilization dependency ratio (LUDR), by income group, 2005–24

Source: calculations based on the ILO LFEP database, July 2019 update.

While unemployment and inactivity indicate a lack of available jobs, time-related underemployment suggests a lack of available paid hours. The LUDR therefore sheds more light on the supply side of the labour market and demonstrates the untapped opportunities of the potential labour force, especially regarding women and youth not in employment, education or training (NEET). In terms of data, this measure shares the same limitations as the EBDR but is further constrained when it comes to historical data points.

The assumption that involuntary part-time workers are essentially dependents may not hold true in all cases. Nevertheless, time-related underemployment is a common feature of in-work poverty. The LUDR unites three key dimensions of labour force underutilization, and the breakdown and disaggregation by age and sex provides valuable information to enable policymakers to formulate targeted responses. Yet, labour underutilization is an imperfect proxy for unproductive employment. It doesn’t capture the fact that workers can be employed full-time, but earn too little to keep themselves and their families above the poverty line. The working poverty rate as well as the rate of vulnerable employment therefore provide additional insights that may be useful to inform policy-making.

Working poverty as a proxy for non-productive employment

Not all of those who work are productively employed. Some workers in paid employment or self-employment may not earn enough to lift themselves and their families above the poverty line. In this case, they can be considered as being economically dependent, meaning that they rely on social or family transfers to live a decent life and cannot support others through their earned income. We define this type of dependency as the working poverty-based dependency ratio (WPDR), with the dependent population consisting of: (a) children below the age of 15 years, (b) persons aged 15 to 64 years who are outside the labour force, (c) all unemployed persons aged 15 years and over, (d) older persons aged 65 years and over, and (e) the working poor aged 15 years and over.

$WPDR=\frac{non\mathrm{ }working\mathrm{ }age\mathrm{ }+outside\mathrm{ }the\mathrm{ }labour\mathrm{ }force+unemployed+working\mathrm{ }poor}{productively\mathrm{ }employed}$

(v)

where:

• non-working-age is the number of persons aged under 15 years or over 64 years;

• outside the labour force is the population aged 15 to 64 years that is not engaged in the labour force;

• unemployed is all persons aged 15 years and over who are seeking and are available to start working for pay or profit in specified reference periods;

• working poor is the number of employed persons aged 15 years and over living in households with incomes below the international poverty line of US$1.90 per day in purchasing power parity (PPP);

• productively employed is the total number of employed persons minus the working poor.

When adding the working poor to the dependency measure, the dependency ratio increases substantially in developing and emerging economies compared to previous measures (see table 2 and figure 10). The largest increase is seen in developing countries, where the WPDR is estimated at 2.84 in 2024. Despite the fact that the WPDR has decreased considerably since the year 2000, when it was 5.76, it is on average about 2.7 times higher than the EBDR, which only considers persons outside the labour force and the unemployed as dependents.

In emerging countries, the convergence of the EBDR and the WPDR is much more pronounced, although the WPDR is still some 15 per cent higher. This means that the number of working poor has decreased in this group of countries7 – mostly in China and India – and, consequently, so has its weight on the dependency measure. In emerging countries, the contribution of the child dependency ratio and the share of young and adult women outside the labour market are currently much higher than those of poverty and unemployment.

Since the working poverty rate, which is based on the international poverty line of US$1.90 per day in purchasing power parity (PPP), tends to be zero in developed countries, the estimates for WPDR are practically identical to those for the EBDR.

Figure 10. Working poverty-based dependency ratio (WPDR), by income group, 2000–24

Source: calculations based on the ILO LFEP database, July 2019 update.

In developing countries, children will continue to contribute more than 50 per cent to the overall dependency rates, while the contribution of older persons remains relatively low at around 4.1 per cent (see figure 11). The share of the working poor will continue to decrease; however, persons outside the labour force combined with the unemployed exceeded the share of the working poor in 2015 and will continue to gain in significance.

The picture is very different in emerging economies, where the contribution of older persons is strongly increasing, while the share of children is slowly declining. The weight of working poverty in total dependency rates has sharply decreased and, although its pace of reduction has slowed since 2015, it is the least important contributor to the overall dependency ratio since that year. At the same time, the contribution of persons outside the labour market and the unemployed, which had been equal to that of working poverty in the early 2000s, has risen sharply, to the extent that it overtook the child dependency ratio in 2016.

Figure 11. Breakdown of the WPDR over time, by income group, 2000–24

Source: calculations based on the ILO LFEP database, July 2019 update.

The working poverty-based dependency ratio adds an important element to the discussion on economic dependency by including a group that is very likely in need of support: workers who cannot lift themselves and their dependants above the poverty line.

Although internationally comparable data is only available from the year 2000 onwards and predictions are limited to the near future, an intertemporal and cross-country analysis can be carried out for around 73 per cent of countries. However, the WPDR suffers from additional limitations similar to those discussed for the EBDR, especially with respect to the working poverty rate, which is a product of the poverty and employment rate. The working poverty rate is based on the headcount index, which does not take intrahousehold inequality or depth of poverty into account. Moreover, different approaches (microeconomic versus macroeconomic) are applied for the calculation, reflecting different data availability and risking compromise of cross-country comparisons (see ILO 2019a; Ostermeier et al. 2015). However, the working poverty-based dependency ratio adds a valuable indication of employment quality and is a proxy for a measure of dependency that relates to (un)productive employment.

The analysis shows that having a job is no guarantee of decent living conditions. Too many workers – especially women and youth – do not earn enough to lift themselves and their family members above the poverty threshold. Targeted policies are needed to further accelerate the progress made over recent decades. This includes ensuring adequate earnings, sufficient working hours, a certain level of job security and access to social protection.

Vulnerable employment as a proxy for non-productive employment

Another way to capture work that may not be sufficiently productive to enable those performing it to support their dependents is to take account of vulnerable employment. According to the ILO definition, vulnerable employment includes contributing family workers and own-account workers. In the context of developing countries, own-account workers are for the most part engaged in petty trading or farming for own-consumption, mostly in the informal economy. This is very different from self-employed workers in high value-added services, such as doctors and freelance IT specialists. In developed countries, own-account workers would ideally capture all self-employed persons who are performing task-based work (including on digital labour platforms), subcontracting to larger firms without an established employment relationship, or engaging in casual work; in other words, workers who are in non-standard and precarious forms of employment (ILO 2016b). However, vulnerable employment so defined does not capture all those in precarious wage employment and involuntary part-time wage employment.8

The vulnerable employment dependency ratio (VEDR) integrates vulnerable workers as dependents and comprises: (a) children below the age of 15 years, (b) persons aged 15 to 64 years who are outside the labour force, (c) all unemployed persons aged 15 years and over, (d) older persons aged 65 years and over, and (e) vulnerable workers.

where:

• non-working-age is the number of persons aged under 15 years or over 64 years;

• outside the labour force is the population aged 15 to 64 years that is not engaged in the labour force;

• unemployed is all persons aged 15 years or older who are seeking and are available to start working for pay or profit in specified reference periods;

• vulnerable employment is the sum of own-account workers (also known as self-employed workers without employees) and contributing family workers (also known as unpaid family workers);

• non-vulnerable employment is the total number of persons in employment minus those in vulnerable employment.

As shown in table 2, dependency increases significantly across all income groups when vulnerable employment is taken into account. In developing countries, the VEDR rises sharply by a factor of 8.5 compared to the EBDR and is predicted to reach 11.40 in 2024. This means that each non-vulnerable worker needs to provide support for more than 11 dependents. The total ratio has been decreasing constantly since 1991 (when it was 16.94, see figure 12); accordingly, the sub-ratio of vulnerable employment dependency will have more than halved by 2024. While men are more often engaged as own-account workers, women are more than twice as likely to work as contributing family members.

In emerging countries, the overall dependency ratio is considerably smaller than in developing countries. It will decrease from 5.36 in 1991 to 3.73 in 2024, mainly due to a shrinking child dependency ratio, although the share of vulnerable employment also fell by around three quarters. Nevertheless, the VEDR is on average three times higher than the EBDR. As with developing countries, men are disproportionally represented among own-account workers and women among contributing family members. The shares of both activities were shrinking for women and men until 2015 and have been stagnating ever since.

In developed countries, the increase compared to the EBDR is much smaller, since comparatively fewer workers are engaged as own-account workers or contributing family members. The VEDR is on average 1.2 times higher than the EBDR. While the total VEDR has been decreasing over time, it is projected to rise again and reach 1.37 in 2024 as a result of population ageing. The distribution of vulnerable employment follows the same gender pattern as for developing and emerging countries, although the discrepancy between women and men is the highest for contributing family members.

Figure 12. Vulnerable employment-based dependency ratio (VEDR), by income group, 1991–2024

Source: calculations based on the ILO LFEP database, July 2019 update.

In developing countries, the vulnerable workers component of the total dependency ratio (34.4 per cent in 2024) is greater than that of persons outside the labour force and the unemployed (19 per cent in 2024) (see figure 13). Clearly, many people have no other choice than to engage in non-productive work owing to a lack of more decent employment opportunities combined with a lack of social protection. Although the total VEDR is decreasing over time, the share of vulnerability in the total dependency ratio is at a persistently high level. The proportions of children and older persons remain the same as in the WPDR.

In emerging countries, persons outside the labour force and the unemployed account for one third, and those in vulnerable employment for one quarter, of the VEDR in 2024. The trend indicates a decreasing share of vulnerable employment and a strongly increasing share of persons outside the labour force and the unemployed between 1991 and 2024. The turning point came in 2010, when the latter cohort became the most important component of the VEDR.

In developed countries, the contribution of older persons increased significantly, surpassing that of children in 2015. The contribution of persons outside the labour force and the unemployed to the overall dependency rate remained at a fairly constant and high level (around 37 per cent) until 2010, when it began falling. Nevertheless, it is still the most important factor of the VEDR, although the elderly dependency ratio is expected to draw level by 2024. The share of vulnerable employment has always been relatively low and has been slowly decreasing from 0.14 in 1991 to 0.09 in 2024.

Figure 13. Breakdown of the VEDR over time, by income group, 1991–2024

Source: calculations based on the ILO LFEP database, July 2019 update.

The VEDR benefits from excellent data availability both in terms of country coverage and time dimension, although projections are limited to the near future. However, the concept of vulnerability is based on strong assumptions which call into question the specificity and relevance of the indicator. First, own-account workers and contributing family members form a very diverse group, ranging from subsistence farmers to productive and profitable enterprises. At the same time, many wage workers are in precarious employment – characterized by low levels of pay and employment protection, and by limitations on their freedom of association and collective bargaining – but are not captured by this indicator. The assumption that own-account workers and contributing family members are intrinsically more vulnerable than other persons is as questionable as the assumption that wage workers would by definition be less vulnerable. Thus, vulnerable employment could be more accurately defined on the basis of employment conditions rather than employment status (Ostermeier et al. 2015), which would then also allow vulnerable employees to be included.

Nevertheless, own-account workers and contributing family members represent a large part of the workforce – especially in developing and emerging economies – with the vast majority of these workers (85 per cent) engaged in the informal economy, which is often characterized by a lack of income security, access to labour rights and social protection (ILO 2018b). The vulnerable employment dependency ratio therefore adds another important dimension to dependency by including workers who are thought to be more vulnerable and hence more likely to be in need of support.

Table 2. Comparison of different dependency ratios, by income group, 2000–30

Notes: DDR: demographic dependency ratio; ABDR: Activity-based dependency ratio; EBDR: Employment-based dependency ratio; LUDR: Labour underutilization dependency ratio; WPDR: Working poverty-based dependency ratio; VEDR: Vulnerable employment dependency ratio.

Projections of employment and unemployment figures based on econometric models are only available to the year 2024. Similarly, projections of time-related underemployment are only available from 2005. As a result, estimates for the EBDR, LUDR, WPDR and VEDR are not included for all years.

Source: calculations based on the ILO LFEP database, July 2019 update.