Immigration and Social Security: After years of contributing to the system with their wages, tens of millions of elderly Americans receive assistance from the Social Security program. However, the Social Security Administration (SSA) is still on a knife edge regarding finances, and if politicians do nothing, payouts might be slashed by about 20 percent in the not-too-distant future.
Social Security is by far the biggest direct outlay of the U.S. government, with an annual expenditure of $1.3 trillion, or almost 5% of the GDP in 2023. It is paid for via government reserve funds and payroll taxes.
Most employees, foreign or domestic, contribute to the fund at a rate of 12.4%, which is split equally between the worker and, if they work for themselves, their company. The trust funds are expected to run out in 2035, and all recipients will suddenly see a 17 percent reduction in benefits if Congress does nothing.
Experts have recommended many ways to shore up the money to stop the approaching crisis. In recent months, experts who have spoken with Newsweek have discussed some proposals, including raising the retirement age, boosting tax rates, and implementing means testing for benefits.
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However, declining birth rates suggest that there might be less taxable income to add to the pot in the upcoming decades. In the upcoming years, it is anticipated that the number of retirees will rise more quickly due to the baby boomer generation’s retirement.
According to Newsweek, the government body claims that whereas 12 percent of the population was 65 years of age or older in 2005, “by 2080, it will be 23 percent.” The government restated the facts in its 2023 Trustees Report: “As members of the post-World War II baby boom continue to retire in greater numbers, the number of retired workers will grow rapidly.” In around 50 years, the number of retired workers is expected to double. In addition, people are living longer and there are fewer babies born.”
There is a solution, however, whether it is desirable depends on your political stance. Immigration is the solution. Like every other American citizen, millions of immigrants pay taxes in the United States through their income. However, would the SSA be spared an uncertain future if more workers who were born outside of the country contributed to the American tax system?
Immigration and Social Security: Why it will be beneficial
Expert groups have predicted that increased immigration will boost the SSA’s financial resources.
The American Academy of Actuaries (AAA) stated in a 2020 report that “putting aside the perspectives in the policy debate regarding immigration policy, it is important to note that an increase in immigration leads to a decrease in the deficit of the Social Security program.”
According to the AAA, there are two reasons why immigration would boost Social Security revenue. Since most immigrants are young, they quickly contribute to the tax system that supports the SSA. In addition, “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.”
More immigrants will “be a larger pool of individuals contributing economically through their labor, thus supporting retirees through Social Security programs and other mechanisms,” according to Doug Roller, founder of Crossroads Financial Group, who made this statement to Newsweek.
In other words, more tax receipts result in increased financing for federal programs.
“Immigration is a contentious issue that often divides public opinion, and the decision to use immigration as a solution to demographic challenges like an aging population is not without political implications,” Roller stated.
While some may see increased immigration as a threat to the employment possibilities of native-born individuals, others may consider it as a good way to solve demographic problems.
One should give great thought to the long-term consequences of depending on immigration to balance demographic fluctuations. Although labour force participation and economic development could offer short-term advantages, one should also consider social or cultural consequences.
