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Tuesday, June 25, 2024

Immigration and Social Security

Many posts have discussed Social Security.

Tara Watson at Brookings:

The Social Security system faces a solvency crisis. It is mostly a “pay-as-you-go” system in that payroll taxes from current workers support current retirees. There is also a trust fund to finance the Social Security benefits of the unusually large cohort of retirees in the Baby Boomer generation (born 1946-1964, who turn 62—the earliest claiming age for those without disabilities—between 2008-2026). The Old-Age, Survivors, and Disability Insurance (OASDI) trust fund is expected to deplete in 2034, at which point there will only be enough funds coming into the system to cover about 75% of promised benefits. Over the 75-year projection window, the Social Security actuaries project a shortfall of 3.61% of taxable payroll, and the CBO suggests a deficit of 5.1% . To square the circle, more revenues need to be raised or benefits need to be cut. Similarly, the 2023 Medicare report suggests that the hospital insurance(HI) trust fund will be depleted in 2031 and the 75-year actuarial deficit is 0.62% of taxable payroll.

Immigrants contribute to both systems. Immigrants with permanent status and dual intent temporary visas are subject to the payroll tax which finances Social Security and Medicare. In addition, some undocumented immigrants work in formal sector jobs using a false Social Security Number; in 2013 it was estimated that the contributions to the Social Security system without a corresponding beneficiary totaled $13 billion. Temporary immigrants without a pathway to permanent status, such as seasonal workers, do not pay into the system.

Of course, many long-term immigrants are recipients of Social Security after they have contributed. On net, however, immigration is a fiscal positive for the Social Security system over a 75-year horizon. In their 2023 report, the Social Security Trustees estimate a 75-year Social Security shortfall of 3.61% of taxable payroll under their midline immigration assumptions. But that number fluctuates from a 3.21% with a high immigration scenario to a 4.02% deficit in the low immigration scenario