Immigration Reform and Social Security

Our View: Comprehensive immigration reform is not a threat to Social Security.

It is estimated that there are about 11 million undocumented workers in the United States today. These immigrants come to our country to work. They contribute to the economic health of our nation. They also make substantial contributions to Social Security through the payroll tax, even though neither they nor their families are eligible to receive benefits. The National Committee to Preserve Social Security and Medicare believes that bringing undocumented workers into our national family would be beneficial for the country and good for Social Security as well.

Our guiding principle in evaluating immigration reform proposals can be summarized in a single word: Fairness. Rules of eligibility for benefit programs should be neither more favorable nor more disadvantageous for immigrants who benefit from comprehensive reform. And contributions made by immigrants to Social Security’s earned-right benefits should, in time, lead to eligibility for benefits.

Comprehensive immigration reform is not a threat to Social Security. Earlier comprehensive reform proposals strengthened Social Security’s financing, and the bills under consideration today should do the same. By bringing undocumented workers out of the shadows of our economy and into its mainstream, immigration reform has the potential to strengthen Social Security and accelerate overall economic growth.

Immigrants and Social Security

Contrary to claims that legalizing undocumented immigrants would damage Social Security, well-crafted and comprehensive reform should not threaten Social Security’s solvency. In fact, if the past is a guide, it could slightly improve the program’s long-term finances. Stephen C. Goss, the chief actuary of the Social Security Administration, has reported that unauthorized immigrants contributed about $15 billion a year to Social Security, adding an estimated $300 billion over the years to the Social Security trust fund.1 During the most recent attempt to reform our immigration system in 2007, the Congressional Budget Office (CBO) estimated granting permanent status would generate $57 billion in additional revenue over a decade.2 At that time, Mr. Goss reported to the Senate that “Provisions that will increase net immigration tend to improve the financial status of the [Social Security] program both because of the immigrants themselves and their children. This effect is much like the effect of increased birth rates, which also have positive effects on the financial status of the program.”

As legal status is granted to current undocumented immigrants, allowing workers to step out of the shadows, contributions to the Social Security program will increase. The CBO estimated that reform would increase the growth of the economy by as much as 1.3 percent. Many undocumented workers pay Social Security taxes even though they are currently unable to claim benefits because of their undocumented status.

Edward Alden of the Council on Foreign Relations has said that immigration reform would actually lead to higher wages and allow immigrants to pay more towards Social Security. “You have people who are often working in very low wage jobs because they’re uncertain about their status. They’re scared. So these people generally, the analysis shows their wages will go up. They’re going to pay more into the Social Security system. The CBO has run these numbers in the past, in the short-run there’s a big boost for the Social Security system.”

While Social Security actuaries have projected more legalized immigrants would collect earned benefits under immigration reform, they have also estimated that reform would strengthen the Social Security program’s financing. Social Security trustees project that an increase in immigration of 100,000 persons a year would improve the long-term actuarial balance of the Social Security’s trust fund by about 3.5% of the projected 75-year deficit. The National Council on Aging also notes the demographic makeup of immigrant families and the positive role it plays in strengthening Social Security.

The immigrant population, in particular undocumented workers, is very young. In fact 59% are between 25 and 44 years of age.6 History has shown that their children, as legal second- generation Americans, would make measureable contributions to our nation and economy. A Pew research study of the 20 million adult U.S.-born children of immigrants shows that these adult children have median incomes and homeownership rates similar to the general U.S. population. In fact, second generation adult children of immigrants have a lower poverty rate and higher college graduation rates. All of these demographic factors are potentially good – not bad – news for Social Security.

As comprehensive immigration reform moves forward, the legislation must address the Social Security-related issues that are associated with it. While not an all-inclusive list, these are some provisions which the National Committee believes should be addressed:

Access to Social Security Benefits

Immigrants who are authorized to work under comprehensive immigration reform should have access to Social Security benefits under the same terms and conditions that apply to others who apply for benefits. There should be no limit placed on the consideration of an immigrant’s wages in determining benefit eligibility by excluding wages and other earnings that were received by an immigrant prior to the granting of lawful presence. This issue is especially important for older immigrants and the disabled, who might not qualify for benefits if the earnings they received prior to work authorization were to be excluded in determining eligibility for Social Security.

Mandatory Use of E-Verify

While the National Committee recognizes the need for a secure, reliable and accurate electronic method of verifying employees’ work authorization, we are concerned about mandating the use of E-Verify by all employers. Because of the program’s database error rates, weak worker protections, and significant employer abuse of the system, E-Verify needs to be strengthened before it can be used mandatorily by all employers. It should be noted, however, that E-Verify is principally a means of enforcing work authorization rules and is not directly related to the administration of Social Security. Therefore, we believe that the cost of such improvements should be borne by the general fund of the federal government rather than the Social Security trust funds.

Federal Identification Documents for All Workers

Among proponents of comprehensive immigration reform, some would require the use of a universally-required work identification document while others propose a form of biometric identification in the identification document or the Social Security card. The establishment of such a system would be very costly, with estimates ranging to as much as $21 billion initially with annual costs of about $2 billion. These new costs appear to be more related to the enforcement of work authorization rules rather than the administration of Social Security and should be borne by the general fund of the treasury rather than by the Social Security trust funds.

Conclusion

The legalization of undocumented immigrant workers would affect both sides of the ledger in Social Security by bringing in more revenue from work-authorized immigrants and by paying more in benefits when they become eligible. However, prior research has shown increased immigration would not be a threat to Social Security’s long-term financial outlook. In fact, the net result will likely improve Social Security’s solvency by a modest amount. The National Committee to Preserve Social Security and Medicare believes immigration reform is not a threat to Social Security if done in a comprehensive and thoughtful way. We urge Congress and the President to work together to enact the kind of immigration reform the nation needs and wants while assuring that issues affecting Social Security and the interests of all seniors are appropriately addressed. The time has come to bring millions of workers who are currently employed in America’s shadow economy into the light.

___________________________________________________________________________

1 “Do Illegal Immigrants Actually Hurt the U.S. Economy?” New York Times, February 12, 2013.
2 “The Budgetary Impact of Current and Proposed Border Security and Immigration Policies,” Statement of Paul R. Cullinan, Congressional Budget Office, before the Committee on the Budget, United States Senate, August 30, 2006.
3 Quoted in Paul N. Van de Water, “Immigration and Social Security,” Center on Budget and Policy Priorities, November 2008.
4 “Immigrant Diversity and Social Security: Recent Patterns and Future,” Urban Institute, 2011
5 Edward Alden, Council on Foreign Relations, “Immigration Reform Could Cost Social Security Billions,” Yahoo Finance, March 2013.
6 “Immigration Reform: Key Issues for Older Adults and People with Disabilities,” National Council on Aging, March 2013.
7 “Second Generation Americans: A Portrait of the Adult Children of Immigrants,” Pew Research Center, February 2013