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Home Publications Blogs Beat the Press The Impact of Immigration Reform on Social Security: Not a Big Issue

The Impact of Immigration Reform on Social Security: Not a Big Issue

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Wednesday, 03 July 2013 03:41

The NYT had a blogpost discussing the possible impact of immigration reform on Social Security. While the post did include statements from a couple of economists saying the impact would be small, its use of dollar amounts without any context might have misled many readers. The post told readers:

"The Center for American Progress, a supporter of immigration reform, says if 70 percent of illegal immigrants are eligible for legal status under the bill, they will contribute $500 billion on net in 36 years — the period that the baby boomers will put a strain on the system."

It is unlikely that many readers have much idea of how large the economy is projected to be over this period or how much Social Security is projected to spend. According to the most recent trustees report, Social Security will spend roughly $100 trillion over between now and 2050. This makes the estimated $500 billion net contribution as a result of immigration reform equal to roughly 0.5 percent of projected spending over this period.

This would have roughly the same impact on the program's finances as an increase in the payroll tax of 0.07 percentage points. By comparison the tax went up by 2.0 percentage points at the start of 2013 as a result of the end of the payroll tax cut.

If workers get  a proportionate share of productivity growth, inflation-adjusted compensation per hour will rise by more than 70 percent over the next 36 years, 1000 times as large as the estimated impact of immigration reform on the finances of the Social Security system. 

 

Comments (2)Add Comment
Please, Please Mr Wolf, Don't Throw America Into the Immigration Briar Patch!
written by Last Mover, July 03, 2013 7:58
If workers get a proportionate share of productivity growth, inflation-adjusted compensation per hour will rise by more than 70 percent over the next 36 years, 1000 times as large as the estimated impact of immigration reform on the finances of the Social Security system.
...
written by skeptonomist, July 03, 2013 10:18
Here's another way to look at it. The "strain" on the SS system* is mostly measured by the size of the excess in the Trust Fund, which should reach around $3T. This is the amount that is supposed to be paid out to boomers, and which will have to be made up through income taxes (not payroll taxes) or rolled over into "public" debt. If immigrants augment SS income by $500B this will take care of 1/6 of the "strain" - not really a major amount.

*Of course the "strain" is not really on the SS system, it will be on those who pay income taxes, who are mostly upper-income people - this is one reason such people tend to want to renege on paying out the surplus in the Trust Fund.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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