As the world population ages and economies slow, get ready to hear another acronym – PSR. The Potential Support Ratio, or the ratio of the working-age population, 15 to 64, per one person 65 and older, may reveal more about the overall health of an economy than the gross domestic product, unemployment rate or other common indicators. This demographic ratio may turn out to be far more consequential for decision-making, resource allocations and societal wellbeing than other commonly utilized economic indicators. A lower PSR may signal economic stress with more elderly depending on fewer young workers to keep the economy humming.
The PSR has weighty implications for governments and businesses concerning the labor force, taxation, education, housing, production and consumption, retirement, pensions and health services. The unprecedented shift towards a larger proportion of older persons and concomitant declines in workers is gradually and inexorably necessitating redesign of national economies.