Economics, U.S. Economy

A simpler way to think about amnesty’s impact on Social Security

immigration

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.

9 thoughts on “A simpler way to think about amnesty’s impact on Social Security

  1. I think you need a stronger case for the potential “takers” as Social Security does not pay out the same to everyone.

    what it pays out is based on what you pay in to a certain extent.

    I’ve seen many people receive very, very low social security benefits…

    and there are those who do not get social security at all if they do not pay into it.

    • LarryG — You’re right, although there are specific things that point toward higher benefit/tax ratios for immigrants. In addition to being lower-income, and so benefiting from the system’s progressivity, immigrants also have shorter working careers. Since Social Security averages your earnings over 35 years even if you haven’t been in the country that long, this makes immigrants earnings appear even lower, and so many can be pushed into the most progressive zone of the benefit formula.

  2. 40 quarters. SS pays more (as a percentage of what they pay in) to a low income worker then it does to a high income worker. The problems and expenses associated with legal and illegal immigration go far beyond SS. This issue may will be the end of the great American experiment.

  3. I prefer amnesty to attrition because it seems to me that amnesty is more humane, so I think amnesty should be granted once enforcement measures are operational. (This does not describe the Gang of Eight bill, which I strongly oppose.) In addition, I propose that the U.S. government should pay households a lump sum of $10,000, or whatever reasonable amount of money would “change calculations” in favor of voluntary repatriation. I don’t know if my plan is feasible, since it would obviously invite fraud and possible encourage more illegal immigration, but maybe if it included safeguards (requiring long-term illegal presence, withholding all funds until verified return of all family members to the country of origin) it might work properly. It would cost the Treasury a lot of money in the short run (for example 10K per household X 100,000 households = 1 billion) but in the long run we’d spend less money on Medicaid, WIC, Head Start, and other means-tested programs.

    • In the Ohio kidnapping of those three girls Ariel Castro held them and tortured them for 10 years. Using your logic since the crime lasted so long he should get amnesty since it would surely be more humane then attrition. My opinion is that by sneaking into this country they broke our laws and should automatically make them exempt from any chance of ever becoming citizens. We should hunt them down, deport them and secure our border. It makes no sense at all to give them amnesty as a reward for breaking our laws. Our government should put the interests of the citizens first and the interests of foriegners especially lawbreaking border crossing scum, should not be considered at all.

  4. It is not clear that the SSA can make a good estimate of the impact of this, since the SSA’s estimates of future program finances are badly done to begin with. Someone from the tech business world critiqued their forecast of future finances as if they were a business plan, and wound them badly done, it is not clear how they get away with a plan apparently hasn’t undergone much serious critique. Details here:
    http://www.politicsdebunked.com/article-list/ssaestimates

  5. For the next three decades, there will be a gain
    from social security payments by new immigrants over
    payments to them upon retirement. Taking new (and
    legalized old) immigrants, the situation will be analagous
    to social security’s initial decades. But the next thirty years are the critical years for the burden placed on
    social security by the baby boomers retirement. In about
    thirty ye4ars, the baby boom generation should begin to
    be replaced by the smaller generation that follows it/ All
    of this analysis depends on a precise calculation, of course but a first glance it may appear that legalizing
    immigrants may help the social security system during
    the critical next thirty years

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