Disadvantages of a high dependence ratio include:
- Leads to low savings and low investment.
- Leads to low productivity in the economy.
- Leads to heavy burden on government to provide essential services.
- Leads to underutilisation of resources.
- Leads to low tax revenue.
The positive implications of an increasing population are:
- Increased labour supply. As population increases, labour supply also increases as more and more people become available for employment at the existing wage
- Wider market. As population increases, the number of consumers in an economy also increases. An increasing population therefore, provides a large and ready domestic market for goods produced both locally and imported.
- Increases the rate of natural resource utilisation. Resources, especially land, that were previously under and unutilised (idle) are brought to use by the existing circulation.
- Increased labour mobility. An increasing population prompts increased mobility of labour because of pressure on the existing resources in areas where population is increasing. Workers migrate from areas where there are shortages of factor inputs and wages are low to areas where co-operant factors are readily available and wages high.
- Declining social per capita. The average cost of providing social infrastructures like roads, education and health per person falls as population size rises.
- Increased innovations. The population becomes more innovative and inventive as they look for ways of increasing output using the limited available resources.
- Strong national defence. An increasing population makes it possible for a sizeable proportion of the population to specialize in production and some labourers are committed to fulltime national defence.
- Government is prompted by the increasing population to adopt appropriate policies such as land reforms, manpower planning and family planning to solve the problem