If all undocumented immigrants were deported today, next year’s Social Security trust funds would have approximately $13 billion less for benefit payouts. It’s a considerable loss of dollars, especially when it’s projected that the Social Security funds will be depleted by 2034.
According to New American Economy, undocumented immigrants contributed $13 billion into the Social Security funds in 2016 and $3 billion to Medicare. Three years prior, the Chief Actuary of the Social Security Administration, Stephen Goss, wrote a report that estimated undocumented immigrants contributed $12 billion into Social Security.
Approximately 11 million undocumented immigrants live in the U.S. with no legal authorization to work, yet an estimated 8 million do, both on and off the books. Since undocumented immigrants don’t have Social Security numbers and are not authorized to work legally in the U.S., they are not eligible for any Social Security benefits, whether they’ve paid into the system or not.
How undocumented immigrants pay into Social Security
Payroll tax, the 12 percent tax taken out of salaried workers’ paychecks, split between employer and employee, primarily funds Social Security, accounting for 88 percent of the payouts in 2017. Undocumented workers typically use a fake SSN or someone else’s SSN when applying for salaried jobs. Only a handful of U.S. states require employers to check an employee’s eligibility and their SSN through E-Verify, a Department of Homeland Security database. Other states have varying levels of E-Verify requirements, from partial to none.
Undocumented immigrants’ payments into the Social Security funds become a murkier matter when they are self-employed. By law, anyone earning an income while in the United States is required to pay taxes, even if they are breaking other laws in doing so.
“The government, the IRS, will never say no to your tax dollars,” said Abigail Zapote, the executive director of the D.C.-based nonprofit Latinos for a Secure Retirement, with a laugh.
Many undocumented sole proprietors, from gardeners to tech startup founders, pay self-employment taxes through an Individual Taxpayer Identification Number, legally issued by the IRS. It would be easy enough not to pay anything to the IRS, especially if paid in cash. But many undocumented immigrants do file with an ITIN to be in good standing with the government should there be an opportunity to apply for a green card or citizenship in the future. Undocumented immigrants who pay self-employment taxes via an ITIN also pay into the Social Security funds, however there are no statistics on exact dollar amounts.
Undocumented immigrants’ contributions to the Social Security funds help its finances, especially because they are not receiving benefits, explains Monique Morrissey, an economist who focuses on retirement at the Economic Policy Institute, a D.C.-based think tank. But since “it’s done so on the backs of the more vulnerable people in society,” she said, “it’s not a good thing.”
This $13 billion stat isn’t known to most voters. It’s not exactly an uplifting PR talking point for immigrant advocates, observes Daniel Costa, director of Immigration Law and Policy Research at the Economic Policy Institute, which focuses on low and middle-income workers. “I guess it’s hard to talk about, because, what’s the next step?” Costa asks of anyone who wants to tout the $13 billion as a positive example of undocumented immigrants’ contributions to the economy, “They’re putting money into it and they’re not going to get any out.”
Population Growth and Social Security
Deporting undocumented immigrants would have a negative impact, short and long term, on the Social Security funds, which are directly linked to population growth, Morrissey said. She points out that the U.S. has a near stagnant native-born population, “Deaths and births are close to cancelling each other out.”
The way Social Security works is that today’s beneficiaries receive money thanks to the current workers paying into the system who will then ideally receive the same benefit payouts when they age and are no longer able to work.
Since the future of Social Security’s solvency is contingent on population growth, it’s inexorably linked to immigration. Immigrants are a major source of population growth in the U.S., both undocumented and those who immigrate legally, which includes the “future citizens” they might produce over the next 20, 40, 60, 80 years.
The future of Social Security
Not all undocumented immigrants are currently paying into Social Security. If undocumented immigrants were able to work legally, they’d have labor rights, mobility and bargaining power, which would likely mean higher taxed wages, resulting in an annual Social Security contribution greater than the current $13 billion.
Costa explains that many undocumented immigrants in the U.S. came because employers initially recruited them for jobs. “I think everyone participated in this,” Costa said, adding that before 9/11, the government gave a “wink and a nod” to employers, who could hire anyone “almost with impunity,” as he puts it. Economists like Morrissey say legalizing the undocumented population, aka providing a “pathway to citizenship,” would be beneficial for the Social Security funds.
Immigration lawyer Matthew Kolken gives the current H-2B non-immigrant visa programs as an example of a guest worker program that works but is “woefully deficient” due to its cap, which he thinks is too small. Countering the argument that immigrants are taking jobs away from working Americans, Kolken said, “I represent employers, they are willing to hire as many Americans that are willing to take the jobs; Americans aren’t willing to take the jobs.”
Kolken said one solution would be to create an expanded guest worker program coupled with a law that wouldn’t penalize undocumented immigrants living inside the U.S. or if they depart the country, for three to 10 years. It would give formerly undocumented workers legal authorization to work with SSNs, allowing for eligibility for Social Security benefits from that time forward.
“No one benefits from having people in the shadows,” Kolken said.
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