Proponents of immigration reform are touting a Social Security Administration memo hinting that the reform package as a whole might cut the system’s long-term deficits. But let’s think about the amnesty provision on its own, in which current undocumented immigrants are made legal to work and collect benefits. How would that affect Social Security?
Here’s a simple way to think about it. Immigrants currently fall into two groups with regard to Social Security:
1. Undocumented immigrants, about half of whom pay Social Security taxes but cannot receive benefits in return. This group obviously is a win for Social Security’s finances.
2. Legal immigrants who, due to short working lives, low earnings, and longer life spans, receive significantly more in benefits than they pay in taxes. This group is a loss for Social Security’s finances.
Amnesty reduces the size of the first group while increasing the size of the second. How does that help Social Security’s finances?
Higher rates of new immigration might (or might not) help Social Security, depending upon how immigrants’ higher birth rates balance out against their low incomes. But I can’t see how amnesty – which is the real crux of the immigration reform debate – helps Social Security.