Can Immigration Help Shore-Up Our Social Security Retirement System?

Can Immigration Help Shore-Up Our Social Security Retirement System?

A paper by the Bipartisan Policy Center (BPC) provides intriguing insights into the role of immigration on our Social Security retirement system. [See “America’s Demographic Challenge: Understanding the Role of Immigration,” Aug. 2017, by Kenneth Megan and Theresa Cardinal Brown].

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The U.S. population has been aging rapidly the past few decades, due mainly to declining fertility rates and increasing life expectancies, a trend that is expected to continue. This demographic shift has placed a strain on our Social Security retirement system because the Social Security trust fund is financed by workers’ payroll taxes, but an ever smaller pool of workers is paying into the fund to finance a growing number of retirees. The solvency of the trust fund depends on having enough workers to support the current population of Social Security retirees. Projections indicate that, absent changes to the system and other policy changes, the Social Security trust fund will be depleted by 2034, requiring immediate and drastic benefit cuts.

The authors of the BPC paper posit that immigration can help boost the solvency of the Social Security trust fund because immigrants tend to be of working aging when they move to the United States and are more likely to be employed than their American-born counterparts, in part because many are highly educated and/or entrepreneurs. Having more workers paying into the Social Security trust fund relative to the number of retirees extends the trust fund’s solvency.

Even undocumented immigration may have a positive impact on the trust fund’s insolvency because, although many undocumented workers pay into the system, they are ineligible to collect Social Security benefits. According to estimates from the Social Security Administration, in 2010, $12 BILLION more was collected from undocumented workers’ payroll taxes than were paid out in benefits. While immigration alone is insufficient to solve Social Security’s long-term solvency problems, the BPC authors believe that, without immigration, more payroll taxes and/or larger benefit cuts (or both) would be needed-and sooner. So, the next time you’re pondering the immigration issues, you might want to consider this bipartisan perspective.

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