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: