Why Immigration Can't Solve the Social Security Deficit

January 2007

Mass immigration advocates sometimes try to tie their open-borders proposals to the looming deficit in the Social Security system as ‘baby boomers’ begin leaving the workforce and receiving benefits. They argue that to support the increased retirees the country needs more workers paying into the system.¹

This argument, however, is based on hype rather than reality. A realistic assessment of that idea appears in a report of the Social Security Advisory Board following a September 7, 2005 meeting with noted demographers, economists and immigration experts to examine the long-range impact of immigration on the Social Security system. The experts at the end of the day’s hearings summarized their position as strongly urging that the Advisory Board not look to immigration as a means for strengthening the system in the long run.² As a result of that expert testimony, the Advisory Board wrote, “While recognizing the importance of immigration to our future patterns of economic and population growth, the Social Security Advisory Board does not view immigration as a panacea or free lunch for saving Social Security.”³

While increased immigration might help the Social Security Trust Fund in the short-run, the reason it is no solution in the long run is the following:

• Immigrant workers age too. They then become eligible for benefits. More foreign workers result in increased future payouts. This helps only as long as larger numbers of immigrants are being brought in than are retiring. In that sense it is a Ponzi scheme. See our study “A Ponzi Problem” for a fuller discussion of this issue.
• A majority of immigrant workers take low-wage jobs. Because the Social Security System is redistributive it pays out more to low-wage workers compared to their contributions than it does for high-wage workers. That means that the more low-wage immigrants who are admitted to work in our country and become eligible for future payments, the greater the burden will be on the future workers to support those retirees.