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

Print
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.