Undocumented Immigrants Giving Social Security, Baby Boomers a Big Boost

Written by on September 8, 2010 in Demographics, Economics, Employment, Undocumented Immigration with 2 Comments

Washington Post columnist and Harvard University Migration and Integration Research director, Edward Schumacher-Matos, recently pointed out what the Social Security Administration (SSA) has known for years—undocumented immigrants contribute to Social Security in a big way. But what surprised Schumacher-Matos was just how much these immigrants contribute, and the fact that many states are trying to pass enforcement measures to drive these contributors out. With an upcoming wave of retiring Baby Boomers (who will receive Social Security benefits instead of paying into the system) and a Social Security system teetering on the edge of insolvency, immigrants (both documented and undocumented), their role as taxpayers, workers and consumers and the question of what to do about our immigration problems become ever more relevant.

In a recent Washington Post editorial, Schumacher-Matos laid out the facts:

  • By 2007, the Social Security trust fund had received a net benefit of somewhere between $120 billion and $240 billion from unauthorized immigrants, representing 5.4% to 10.7% of the trust fund’s total assets ($2.24 trillion) that year.
  • Unauthorized immigrants paid a net contribution of $12 billion in 2007 alone.
  • The cumulative contribution is surely higher now.
  • Roughly two-thirds of unauthorized immigrant workers, or 5.6 million people, were paying into the system in 2007.
  • Few of these contributing unauthorized immigrants are likely to receive anything, ever.

The SSA’s chief actuary, Stephen C. Goss, went on to say that if it wasn’t for undocumented immigrants paying into the system—the majority of whom, mind you, will never collect the benefits—the SSA wouldn’t have been able to cover payouts in 2009:

If for example we had not had other-than-legal immigrants in the country over the past, then these numbers suggest that we would have entered persistent shortfall of tax revenue to cover [payouts] starting [in] 2009, or six years earlier than estimated under the 2010 Trustees Report.

As Baby Boomers (born between 1946 and 1964) start to retire, the ratio of seniors to working-age adults (25 to 64) will be thrown out of balance, causing massive Social Security underfunding. According to a report by Dowell Meyers of the University of Southern California, “over the next 20 years, the number of senior citizens relative to the number of working-age Americans will increase by 67 percent,” which means that more and more retirees “will transition from being net taxpayers to net recipients of pension benefits, and they will be supported by a smaller workforce that is struggling to meet its own needs.”

So as we pull out of the recession, employment rates return to normal and more and more Baby Boomers retire, who, exactly, is going to fill this gap? Enter immigration.

Clearly, having roughly 8 million undocumented workers in the U.S. workforce is not an ideal situation. While these undocumented workers do, in fact, shoulder some of the SSA’s solvency burdens, keeping them in our workforce is not only exploitative, it’s unfair. And it’s not a long-term solution. Yet neither is the recent “enforcement through attrition” strategy employed by immigration restrictionists to drive undocumented immigrants out.

Study after study indicates that immigration reform which includes an earned path to legalization—that is, allows these undocumented immigrants to become taxpaying U.S. citizens—would go a long way in filling the void. It is sad, but not surprising, that complex policy issues like Social Security reform and immigration reform have long been stymied by a political lack of will. It is also sad, but even more ironic that the same solution—comprehensive immigration reform—is critical to solving both problems.

Photo by americanconsumers.

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  1. Leslie Sirag says:

    As the grandchild of immigrants, I am well aware of their contributions to the US economy, and think that allowing undocumented workers to earn citizenship makes good sense both for them and for the US labor force and Social Security system. However, I also believe that it’s time to make those earning the highest salaries contribute the same % to Social Security as the rest of the labor force–there’s no excuse for a cut off point and tax break for those making the most money.
    It may also be necessary to graduate payouts on some sort of post-retirement income based scale, as well. People don’t pay Social Security taxes on non-wage income, but again, that’s mostly people in higher income brackets. If Social Security is an insurance against poverty, there’s an argument for paying only people who have, say, less than the median income for their area.

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