In 2009, the last year for which data is available, employers reported wages of 72.8 billion or 7.7 million workers who could not be matched to legal social security number. Because those wages were reported by employers and not paid under the table, Social Security and Medicare deductions had to be made. A total of 12.4 percent of those wages went into the SSA system, 6.2 percent paid each by the worker and the employer.
This translates to roughly 9 billion dollars injected into the Social Security Trust Fund due to illegal immigrants in 2009. Clearly illegal immigrants have been helping to fund our retirement system for some years and it is safe to say that the system would be in worse shape without immigration. Why illegal immigrants filed their paperwork to pay Social Security and Medicaid is a separate issue.
This gives rise to an interesting policy option for fixing social security. We could allow all immigrants between the ages of 18 and 25 to enter the U.S. and work legally. This injection of workers would pay into the Social Security system and could help to offset the retirement of the baby-boomer generation and would fix the looming Social Security deficit if we let enough immigrants into the country. I do not know what the exact number needed would be, likely it would be very large. Of course this would be very difficult to pull off politically and there would be other economic impacts of a mass immigration, especially if all the workers were of the unskilled variety. Perhaps we could limit it to all educated workers between the ages of 18 and 25. What would be some of the negatives and positives of a wave of skilled immigration?
There is also the issue that creating another population boom of entirely one age group does not fix social security in the long-run, it only kicks the can further down the road. What would the overlapping generations framework we looked at in class have to add to this discussion?
Here is the link to the article which the above facts came from:
http://seattletimes.com/html/nationworld/2017113852_immigtaxes29.html
2 Comments
Hmmm …. crunch some numbers! — how big is the shortfall and how many immigrants would we need at what wage level? Does $9 billion go very far?
Note of course that this includes all errors, people who filed the wrong number with their employer and not just illegal immigrants. Indeed, isn’t their a market for “real” SS numbers, because in some states employers can be required to check? In that case, someone not actually working gets credit for the immigrant’s work, and as long as that person doesn’t insist on correcting their record and potentially receiving a smaller SS check at age 66, there’s no savings to be had.
Besides adding several billion dollars into the social security Trust Fund, immigrants also contribute to greater consumption and lower service costs.
However, considering the theory that says illegal immigrants takes away jobs of low-skilled U.S workers (advocated by George Borjas), it’s questionable if we should be more tolerant towards illegal immigration just because of that 9 billion dollars (which I think is the tone of this article). In addition, illegal immigration increases some social issues such as crimes and prostitution. Their children also bear some burden on the U.S. public education system. The cons of illegal immigration are hard to quantify.
It’s also interesting to read some of the comments below the article. Many people expressed a hateful attitude towards Mexican immigrants, call them ID criminals and would like to deport all the illegal immigrants from the U.S.
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