Undocumented Immigrants and Social Security: Separating Fact From Fiction

Are undocumented workers really a drain on Social Security’s resources?

My Comments: The boogyman is trying to get you riled up. And to the extent you are riled up, it’s diverting you from an uncomfortable truth.

Congress needs to change the Social Security rules in a manner similar to what it did back in 1983. What was done then didn’t end the world as we knew it. Instead it allowed society to better fulfill a role that has millions of years of history behind it.

Namely the care provided to those in society who for whatever reason are still alive and suffering from infirmities, both financial and health as they get older. Unless and until we as a society decide to encourage people to wander off into the woods to die, we need to maintain and find better ways to look after them.

A realistic conversation on this topic must start soon.

by Sean Williams \ Feb 7, 2019

Social Security is America’s most important social program, and it’s probably a lot bigger than you realize. Each month, close to 63 million people receive a benefit check, about 70% of whom are retired workers. Pretty much 9 out of 10 of these current retirees lean on their payout in some respect to help make ends meet, with an analysis from the Center on Budget and Policy Priorities finding that more than 15 million seniors are kept out of poverty as a direct result of their guaranteed monthly payout.

Social Security is also responsible for covering an estimated 175 million working Americans to some extent, be it through long-term disability insurance in case of an accident or via survivors insurance for their loved ones in the event of an untimely death. Most Americans are covered to some degree by Social Security right now.

Social Security’s biggest challenge ever awaits

And yet this always-vital program is facing a rough road ahead. The 2018 report from the Social Security Board of Trustees estimated that the program was set to hit an inflection point, whereby more money was expended than collected in a given year. Although this prediction narrowly failed to come true in 2018, ongoing demographic changes are likely to make it a reality sooner than later.

Per the Trustees report, the nearly $2.9 trillion in net cash surpluses that the program has amassed since inception, and which are currently invested in special-issue federal bonds, could be completely exhausted by 2034 as the result of expenditures growing at a much faster pace than revenue collection. If this were to happen, and Congress failed to raise additional revenue or make expenditure cuts prior to 2034, a sizable payout reduction for current and future retirees of up to 21% could await.

In other words, Social Security’s existing payout schedule isn’t sustainable without a fix, and the program itself clearly has issues. The hot-button debate has always been what those issues are. Some folks have contended that the federal government flat-out stole money from the Social Security program and/or borrowed money with no intention of paying it back. Of course, this narrative is without merit.

What’s the true story on legal immigration?

Peruse social media, and you’ll find another popular opinion is that immigrants, or more specifically undocumented workers, are the source of the program’s problems. It’s been postulated that payouts being made to undocumented immigrants who aren’t paying into the system is what’s barreling Social Security toward insolvency. How much of this is actually true?

Before we can assess the impact of undocumented immigrants on Social Security, we first have to examine the impact of immigration as a whole on the program. Believe it or not, the Trustees factor in legal immigration when making their short-term (10-year) and long-term (75-year) assessments of the program. Legal immigration has been a constant for the U.S. since these annual reports began, and it’s expected to remain a constant going forward.

Legal immigration is itself a very good thing for the Social Security program. The reason is simple: Most legal immigrants tend to be young, which means they’re likely to remain in the workforce for decades. Their payroll tax contributions into the system are vital to its short- and long-term health — even with legal immigrants working their way into a Social Security retirement benefit over time.

Fact or fiction: Undocumented immigrants are killing Social Security

But what about undocumented immigrants? They have to be a drain on Social Security, right? Actually, no, they aren’t. For starters, undocumented immigrants don’t have a legal path to citizenship and are therefore unable to obtain a Social Security number. As such, they won’t be entitled to the same protections and benefits as a worker who is a legal citizen or is on the path to legal citizenship. Or, in plain English, they can’t receive a traditional Social Security benefit. Period!

Mind you, the Supplemental Security Income (SSI) program, which is probably best known for providing added income benefits to low-income seniors, disabled persons, and the legally blind, can also provide benefits to asylum seekers, refugees, and persons admitted for lawful permanent residence. Although the Social Security Administration oversees the SSI program, they receive funding from different sources and aren’t comparable. So to say that Social Security is paying benefits to noncitizens wouldn’t be accurate.

Interestingly enough, even though undocumented immigrants won’t qualify for a traditional Social Security benefit, it doesn’t mean they aren’t contributing to Social Security in a positive way. A recent analysis from New American Economy found that undocumented immigrants contributed $13.3 billion into the system via the payroll tax in 2016. This jibes with an AARP report that found $12 billion in payroll tax contributions from undocumented workers in 2010.

How the heck are undocumented immigrants paying into the system when they have no Social Security number (SSN), you ask? The answer is that they’re either using a fake SSN to get hired or using a friend’s SSN. Marketplace.org notes that very few states require employers to check an employee’s eligibility and SSN through E-Verify, a Department of Homeland Security database. This allows potentially millions of undocumented immigrants to receive a paycheck, albeit their contributions via the payroll tax are under someone else’s SSN.

Here’s another way to think about what undocumented immigrants have meant for Social Security. In 2018, the program generated a net cash surplus of nearly $3.2 billion, its smallest on record since the mid-1980s. Without a fairly steady level of payroll tax contributions from undocumented workers, Social Security would have expended more than it collected in revenue for the first time in 36 years last year.

In short, undocumented immigrants are not a drain on Social Security. If anything, the opposite is true.

Source: https://www.fool.com/retirement/2019/02/07/undocumented-immigrants-and-social-security-separa.aspx

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