The surprising math of immigration, Social Security and Medicare

By Brett Arends

Immigration will have an effect on your retirement - but it's probably not what you think

You don't have to go to Springfield, Ohio, to see that immigration is an issue that gets people riled up - on both sides.

Given what we know of human nature, maybe we shouldn't be surprised. Immigration can affect so much - from religion and culture to the economy, from wages and house prices to the languages spoken in schools. Of course people are going to have opinions.

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It is neither my intent nor my inclination to weigh in on this issue. But I do want to clarify one thing that is often misunderstood.

Immigrants are not costing Social Security any money. They are not costing Medicare any money. That is true of immigrants with legal status in the U.S. - but it is also true of people who entered the country illegally. Both groups actually help those programs financially.

Social Security and Medicare currently have a $78 trillion black hole in their collective accounts. But not one dollar of that is caused by immigration. Not one nickel.

We did that ourselves, folks.

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You don't have to take my word for it. You can read the annual reports from the trustees of both programs. They talk about this at length every year. Net immigration helps the numbers for both programs. The more, the better. Or you can read a new paper from the American Academy of Actuaries. They've just run the numbers.

"Increased immigration can help increase the labor force contributing to Social Security, improve the current 2.7 workers per beneficiary ratio, slightly delay the depletion of the trust funds, and eliminate about 11% of the 75-year actuarial deficit," they write. Still, they add, "it is not a silver bullet to 'solve' 100% of Social Security's financial problems."

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The reason? Immigrants who are here legally pay into the system like everybody else. But they tend to be younger than the U.S.-born population, and they tend to have more children. Both of those things are positive for Social Security and for Medicare. It means there are more people paying in, and even more future workers down the line, to support the people who've retired.

By contrast, the U.S.-born population is aging and has a lower birth rate.

As the actuaries' paper reveals, if we cut net immigration into this country to 829,000 a year, we would need to raise the Social Security tax by 3.9 percentage points, from 12.4% to 16.3%, to balance Social Security's books for the long term without cutting benefits.

But if net immigration was 1.68 million a year, that figure drops to 3.1%.

Immigrants also help both programs by stimulating the economy. The academy reports that immigrants are more likely than those of us who were born here to start a business, and they are more likely to participate in the labor force - that is, to work.

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What about immigrants who are in the country illegally? They aren't costing Social Security or Medicare any money, either. They are not eligible for either program. They cannot claim Social Security or Medicare benefits (though I'm sure someone can find an isolated fraudster here or there, just as you can among the U.S.-born population).

Meanwhile, workers who are in the country illegally may be using a stolen or fake Social Security number. That means they're paying into the system, through regular FICA deductions, just like everyone else, even though they cannot then claim benefits.

The Social Security Administration even has a file, called the Earnings Suspense File, where this money goes. We make money off these people.

None of this is a conclusive argument either way about immigration. But it raises challenges - for both presidential candidates and both parties. Slashing legal immigration and deporting millions of people who are working here without proper documentation will not help Social Security's or Medicare's finances. On the other hand, giving immigrants who are in the U.S. illegally the legal right to live and work here will make them ultimately eligible for benefits, as long as they work the required number of quarters. These are all math issues that need to be considered.

My own question is why we aren't letting in more highly skilled workers. We spend more time talking about low-wage immigration from countries to the south of our border than we do about bringing in scientists, doctors, dentists, engineering graduates, computer programmers and the like from all over the world.

H1-B visas, which are given to people with specialized or advanced skills, are heavily oversubscribed every year. It's nuts. Highly skilled workers are a straight gift to our economy. We might just as well complain if someone hands us money. We should take most of them. Among the many winners will be Social Security and Medicare.

-Brett Arends

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09-21-24 0849ET

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