Illegal (and Legal) Immigrants Won’t Save Social Security

A commonly heard cliché is that illegal immigrants help to support Social Security. One who expressed this view recently was libertarian ideologist John Stossel who never leaves a stone unturned to justify his open borders agenda. He stated, “[I]llegal immigration helps delay the bankruptcy of Social Security and Medicare. Young workers pay into the system – but most don’t collect.”
 
The idea is that illegal aliens – who can’t legally collect Social Security when they reach retirement age – are rendering our country a great benefit by supporting American seniors with their Social Security payroll taxes. But at best this claim is only a half truth. Specifically, around half of illegal aliens working in the United States don’t pay federal and state taxes. They work off the books and under the table.

Even some who do pay into Social Security take out as much or more than they contribute through fraudulent use of the Earned Income Tax Credit. This provision allows low-income workers to receive what amounts to a rebate on Social Security payroll taxes based on the number of dependents. Illegal aliens often game the system by claiming more dependents than they really have. According to an audit by the Treasury Inspector General for Tax Administration, the total of this fraud came to more than $4 billion in 2010.
 
Even when illegal aliens genuinely contribute to Social Security, it is not a net gain for this country. All taxes they pay are considerably less than all the public benefits they receive. The Heritage Foundation calculates this net loss at $54.5 billion a year. Thus the contributions of illegal aliens to Social Security are no fiscal bargain.
 
Some maintain that the situation would improve if illegal aliens received amnesty. Their basic argument is that with legal status the illegal aliens now working under the table would start paying Social Security taxes. And all former illegal aliens, according to this argument, would receive higher wages as a result of entering the legal workforce. Higher wages, in turn, would increase the taxes they pay.
 
This view mistakenly assumes their upward mobility. Can we be so certain that employers who now hire illegal aliens will necessarily retain them as legal higher-paid workers? If newly arriving illegal aliens are available – and nothing now suggests that they won’t be – why wouldn’t these employers hire them instead?
 
In any case, amnesty does not change the fact that most illegal aliens lack the education and skills necessary for jobs that pay well – jobs that are increasingly scarce for everyone in the U.S. now. Research on the consequences of the 1986 amnesty indicates the illegal aliens who received legal status continued to lag economically.
 
While the advocates of amnesty speak about its alleged benefits for Social Security, they seem oblivious to one rather obvious reality. Once illegal aliens get legal status, they will be able – at least some day – to draw benefits from the program. And given the fact that most of them would be people who held low-income jobs, their benefits from Social Security would tend to exceed their contributions. This is in fact the case with low-income native-born citizens.
 
No, illegal immigration, with or without amnesty, is no solution for Social Security, and neither is legal immigration, as some propose. Social Security definitely faces a problem with progressively fewer young workers to support our large elderly population. The alleged solution is to lower our average age by admitting young immigrants. The problem with this “solution” is that it would require a vast increase in our already massive level of immigration just to maintain the status quo. As a study by the Pew Research Center reported last year, “[I]n the U.S. keeping the old-age dependency ratio through 2050 would call for immigration inflows 15 times the present rate.”
 
Could we provide decent-paying jobs for such a deluge of people so that they could support the elderly? Once again, we might consider just how well the economy is providing good jobs even at the current level of immigration. Then too, let’s not forget that the immigrants, like all humans, will age and become eligible for retirement benefits. What should we do then, admit another deluge of foreign workers?
 
Keeping Social Security solvent will be a vexing national question, but mass immigration – illegal and legal – offers no answer. Unrestrained numbers foster social insecurity as they increase unemployment, wage suppression and poverty.