Immigration can't save Social Security
It's an article of faith among immigration advocates that bringing in more Latin Americans, Asians, and others can help solve some of the America's most intractable demographic problems.Skip to next paragraph
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An aging workforce? No problem. Immigrants will fill the jobs retirees leave behind. Medicare? Taxes on immigrants' wages will help fill the gap. Social Security? Ditto.
The key point is that the average age of immigrants in recent years has been 29, which means they have plenty of years to work and pay into the system "before drawing a nickel" in retirement, says Ben Wattenberg, an analyst at the American Enterprise Institute, a Washington think tank.
But Mr. Wattenberg and other pro-immigration activists are getting a sharp challenge from Steven Camarota of the Center of Immigration Studies in Washington. In his view, immigration "doesn't make much difference."
Every year, the United States nets an additional 1.3 million people from overseas, Mr. Camarota figures. That's the largest flow of new immigrants in US history. But in a nation of 293 million, it's peanuts - less than 1 percent a year.
Furthermore, immigrants, just like native-born Americans, have a birthday each year. So the relative youth of recent immigrants and their tendency to have more children than natives have had only a minor effect on the average age of Americans. Nor do projections into the future show much change.
In a 19-page study using 2000 Census data and more recent data, Camarota offers somewhat startling findings:
• In 2000, the average age of an immigrant was 39. That's about four years older than the average age of a native-born American. That number includes immigrants who have been in the country a long time.
• If the 22 million immigrants who arrived after 1980 are excluded from the 2000 Census data, it raises the average age of the remaining native population by only four months.
• Immigrants aren't the primary reason for the relatively high fertility rate in the US of 2.1 children per woman, compared with 1.4 in Europe, 1.5 in Canada, and 1.3 in Japan and South Korea. Immigrant women in the US average 2.7 children. Even so, without the immigrants, the US fertility rate would have dropped to only about 2 per woman. Moreover, the fertility rate of the children and grandchildren of immigrants quickly drops toward the average of native-born Americans.
• In 2000, 66.2 percent of the population was of working age, that is, between 15 and 64. Without the 31 million post-1980 immigrants and their US-born children, the working-age population would be 66 percent, virtually unchanged, even though 81.9 percent of immigrants in 2000 were working age.
That working-age percentage is crucial when considering whether there will be enough workers in the future to support those who are retired.
The Social Security Administration, in making its standard 75-year projections into the future for the system, must make several assumptions about immigrants, including how many arrive each year. It also assumes 25 percent of new arrivals will leave the US each year, and that they will have average earnings.
In fact, Camarota notes, a large body of research shows immigrants on average make decidedly less money than native-born Americans. So they pay less payroll taxes. And they draw out proportionately more because the system is structured to redistribute income a little. It provides a bigger pension to low-income workers relative to their Social Security contributions than it does for higher-income workers.
Thus, the younger age of immigrants may not result in a positive impact on Social Security, Camarota concludes.
Moreover, many immigrants are eligible to draw on the Earned Income Tax Credit, a program Congress devised in 1975 to refund all or part of Social Security taxes paid by low-wage workers. The credit is funded out of general revenues, not by the Social Security system. But it remains germane to the aging issue.
Even if legal immigration was doubled - from an assumed 800,000 per year to 1.6 million - it would still leave more than 90 percent of the Social Security future funding problem in place in dollar terms, Camarota calculates.
Of course, immigration advocates have varied reasons for their position. Wattenberg, for instance, sees a large US population, enlarged by immigration, as important to the nation's power.
"A big strong country can do things in its own best interest more than a weak small country," he says.