Alamogordo NM
2-21-2024 7:33pm

Economic Outlook and Legal Immigration Facts to Stabilize Social Security

The success of the United States economy comes in large part, from our longstanding tradition of encouraging people seeking a better life to leave everything they know to contribute to our country. Severely limiting LEGAL immigration puts our nations economy and the support of funding social security for the ever increasing number of retirees at risk.

The immigrant share of the labor force reached a record high of 18.6% in 2023, according to our analysis of Current Population Survey (CPS) data from the Bureau of Labor Statistics.

Instead, we should protect and expand current immigration levels and work to pass immigration reform that makes it safer, faster, and more efficient for prospective immigrants to enter the U.S. and begin contributing.

Between 2010 and 2020, the U.S. saw its slowest population growth of any decade since the 1930s. In recent years, fewer children have been born. Immigration levels have also decreased. Future immigration is needed to increase the U.S. population size overall, but also to maintain a senior to working-age ratio for growing the U.S. economy.

According to FWD.us projections, the U.S. should double immigration levels to remain globally competitive with other economies and keep fiscal programs like Social Security strong. Most projected population growth in the U.S. is due to immigration. If immigration to the U.S. were to cease, the U.S. population would be about the same size in 2050 as it would be today.

Immigrants make significant contributions to our economy on virtually every front – including on tax revenue, where they contribute $458.7 billion to state, local, and federal taxes in 2018. This includes undocumented immigrants, who contribute roughly $11.74 billion a year in state and local taxes, including more than $7 billion in sales and excise taxes, $3.6 billion in property taxes, and $1.1 billion in personal income taxes. These billions of tax dollars fund our schools, hospitals, emergency response services, highways, and other essential services. These revenues would increase by $2.18 billion annually if undocumented immigrants were given legal status as part of an immigration reform package. Additionally, immigrants make enormous contributions to Social Security. If current legal immigration levels were cut by 50%, the Social Security fund would lose $1.5 trillion in revenue over the next 75 years.

The reality is that the economy does not have a fixed number of jobs, and what we see today is a growing economy that is adding jobs for both immigrants and U.S.-born workers. 

According to the Economic Policy Institute…
The unemployment rate for U.S.-born workers averaged 3.6% in 2023, the lowest rate on record, ever! Obviously, immigration is not causing high unemployment among U.S.-born workers and the economy is robust overall. 

The share of prime-age U.S.-born individuals with a job is at its highest rate in more than two decades. In 2023, the prime-age (ages 25–54) employment-to-population ratio (EPOP) for U.S.-born individuals was 81.4%, up from 80.7% in 2019 and now at its highest rate since 2001.

The prime-age labor force participation rate (LFPR) for U.S.-born individuals is also at its highest rate in more than two decades. In 2023, the LFPR for prime-age U.S.-born individuals was 83.9%, up from 83.3% in 2019 and now at its highest rate since 2002. Further, the increase in the U.S.-born prime-age LFPR over the last year was the second highest on record—below only the increase that occurred the year before last.

Though the immigrant share of the labor force reached a record high in 2023, immigrant labor force growth is not occurring at an unprecedented rate. From 2019 to 2023, the immigrant labor force grew 2.3% annually on average, according to our analysis of CPS data. That is strong growth, but it’s roughly one-third the rate the economy experienced between 1996 and 2000 (which, just like 2022 and 2023, was a period of very low unemployment—and strong employment growth—for U.S.-born workers). Immigrant inflows into the labor force over the last year alone were also not unprecedentedly high—for example, the pace was slower than in 2022 and slower than three of the years from 1996–2000.

Excerpts from an Issue Brief from the American Academy Of Actuaries illustrates how an increase in immigration can stabilize the size of a country’s working population in an environment where birth rates are declining.

The Social Security program is mainly funded on a pay-as-you-go basis. This means that current benefits in pay status are funded mainly through payroll taxes that are paid by current workers and their employers. 

In 2019, income of the trust funds has exceeded expenses by around 0.2 percent. Since the mid-1970s through 2019, the life expectancies of both men and women have increased and are projected to increase further. In the same period of time, the number of workers paying into the Social Security program per beneficiary collecting benefits has declined, and is projected to decrease further.

Each year, the Office of the Chief Actuary at the Social Security Administration (OCACT) performs a projection of the finances of the Social Security system as overseen by the Social Security Board of Trustees. The report issued is called the Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (Trustees Report). According to the 2020 Social Security Trustees Report, because the life expectancy of retirees is improving and the number of workers per beneficiary is declining, income to the trust funds is projected to fall short of expenses each year beginning in 2021, requiring that the trust funds be drawn down to continue paying scheduled benefits.

According to the long-range projection in the Trustees Report, using the intermediate assumptions, the trust funds will be depleted in 2035. In the years immediately following, income will be sufficient to pay only 79% of scheduled benefits.

An increase in immigration would have the effect of stabilizing the size of a country’s working population in an environment where birth rates are declining and would stabilize Social Security to the point cuts would not be necessary in 2035.

Because immigrants tend to be younger workers, they pay taxes immediately into the Social Security program, while they receive benefits many years into the future—or, sometimes, not at all. Further, immigrant women tend to have higher birth rates than U.S.-born women, increasing the overall U.S. fertility rate, which extends the positive tax-paying effect into future generations. We don’t need to close the borders we need to reform the immigration system to protect the future and social safety net of natural born Americans. 

Source: Immigration Policy Institute, CATO,  Economic Policy Institute, FSU.us

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