While there are ongoing discussions about immigration, and in particular the effects of stricter enforcement measures on the elderly, it is important to remember that the possible ripple effect could have on the funding for Social Security, or the overall economic stability.
Social Security funding: A critical overview
Payroll taxes and reserves of the government are used to sustain Social Security. This is an important part of retirement security. Despite projections that trust funds may be exhausted by 2034, the system is facing long-term challenges. Without legislative intervention, this could result in benefit cuts. The looming financial crisis highlights the need to understand all of the factors that affect Social Security.
We cannot ignore the role that immigrant employees, and those with no legal status in particular, play in Social Security. They pay payroll taxes but a large portion of them may not be able to collect benefits. In effect, this creates a positive net contribution that boosts the reserve fund.
Center for Immigration Studies noted that this is a phenomenon. They note “illegal immigration benefits Social Security and Medicare Trust Funds unambiguously” as taxable contributions are made by people who don’t qualify for any benefits. According to the Institute on Taxation and Economic Policy, in 2022, the United States’ undocumented population paid $25.7 billion dollars in Social Security and Medicare taxes. Reduced funding could be exacerbated by a reduction of this workforce.
Inflation, Economic Growth and Impact
A stricter antiimmigrant policy can have a negative impact on the economy in general, including inflation and growth. Around 4-5% of U.S. workers are undocumented, and this percentage is higher in some industries. This could lead to disruptions and higher prices.
Goldman Sachs’ economists predicted a possible decrease in net migration to the U.S. This could reduce potential GDP growth. The shortage of labor can increase wages, which in turn will contribute to inflationary pressures.
In the healthcare sector, there are many workers living in America without permission. This sector is susceptible to disruptions that could impact the availability and cost of healthcare.
Determining the economic effects of immigration, especially on Social Security, inflation and other factors, is crucial to making informed decisions. These broader trends are interconnected with the economic wellbeing of retirees, which highlights the importance of comprehensive immigration policies that use data.