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Raise immigration quotas, not taxes

By Julian L. Simon / July 29, 1987

AFTER the demands of programs for the elderly and defense, there is precious little remaining for other worthy federal programs. Privatizing social security may reduce the squeeze in the long run, but not in the short run. And with the current low birthrate, there is no hope that a larger number of working-age people will eventually enter the labor force to distribute the cost of supporting the elderly more widely. Other than raising taxes, only a larger legal immigration quota can immediately help the federal budget. Immigration mainly increases the number of young skilled working people who pay high taxes and use few government services.

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The average immigrant begins working - and contributing to the public coffers - quite soon after arriving in this country. The immigrant's own eventual receipt of social security benefits, decades down the pike, does not offset these immediate benefits to others.

Those benefits stem in large part from the difference in age composition between the native population and that of each immigrant group. Immigrants tend to move when they are near the start of their work lives. For example, perhaps 4 percent of immigrants are aged 60 or over, while about 15 percent of the United States population is 60 or over. And while perhaps 26 percent of the US population is in the early prime labor force ages of 20 to 39, perhaps 46 percent of immigrants is in that age bracket. Moreover, even the small number of immigrants who are elderly are not eligible for social security. Therefore, each group of new immigrants, in proportion to its numbers, contributes substantially to reducing the social security burden of natives in the new country.

Anti-immigration lobby groups pooh-pooh this benefit from immigrants by saying that the total dependency burden of the US population is not now increasing, owing to the decreasing number of dependent children. Over the next generation, the reasoning goes, each member of the labor force will support fewer nonworkers, even with less immigration than at present. There will be more older nonworkers to support, but fewer young ones.

Dependent children, however, affect the taxpayer differently than do the elderly. Parents pay most of the cost of raising their own children in this country. Also, yearly living costs of a child are far less than the living costs of an aged adult. This is obvious when one reflects on the comparative costs of housing, medical care, and transportation. Children's public school expenses do not much alter the overall picture.

Must US natives pay the piper for this benefit from immigrants when the immigrants get older and themselves receive social security? The answer is ``no,'' for two reasons. First, the impact of this year's immigrants on social security perhaps 30 years from now properly has little weight in the overall economic assessment, because a dollar to be received or paid out in 30 years is worth little now when discounted at even a modest rate. Second and more important: By the time new immigrants retire, they typically have raised children who are then contributing to social security, balancing out the parents' receipts, just as with native families. Hence there is a one-time benefit to natives because the immigrants arrive without a generation of elderly parents who receive social security.