Thursday, March 10, 2005

Importing PAYG payers 

stopping or reducing legal immigration 'would worsen the solvency of Social Security, harm taxpayers, and increase the size of the long-range actuarial deficit of the Social Security trust fund.'
From a Wall Street Journal editorial today. The quote comes from a study recently done by Stuart Anderson at the National Foundation for American Policy. The flip side, from the study:
Over the next 75 years, new legal immigrants entering the United States will provide a net benefit of $611 billion in present value to America�s Social Security system, according to official Social Security Administration data.

...Increases in legal immigration would provide a significant boost to Social Security. The size of the actuarial deficit would be reduced over 50 years by 10 percent if legal immigration increased 33 percent (an additional 264,000 immigrants a year) and by 6 percent for a 20 percent rise in legal immigration annually (160,000 more immigrants a year.) A 33 percent increase in legal immigration would increase revenues to Social Security by a present value of $169 billion over 50 years and $216 billion over 75 years. A 20 percent legal immigration increase would add $101 billion in present value to the trust fund over 50 years and $128 billion over a 75-year period.

It's not clear whether or not legal immigration makes our country's living standards grow faster -- you get more GDP, but you also have more people. The NCAP study seems to view those as a wash. But unless legal immigration included a percentage of seniors as high as the share of seniors in our current population, you get a rise in the critical workers-to-retirees ratio by allowing additional legal immigration. (The study notes that "typically arrive near the start of their working years and may contribute to the system for up to four decades before receiving any benefits.")

This has been something I've thought about as I write some papers lately on remittances of emigrants and migrant workers. Though my particular area is the former Soviet Union, the issue is perhaps of greater import in the Western Hemisphere, where the U.S. brings in many legal and illegal workers. One strand of literature I've read lately is called "the New Economics of Labor Migration", which argues that many migrants come to the industrialized economies to work with a specific goal in mind, to earn enough money to buy property or start a business in their home countries, and then they return. This would strike me as an even better bargain for Social Security, since they would pay but never draw on the fund. The Bush Administration seems to get this point, which maturally leads to policy proposals like the guest-worker program, which allows a worker three years to earn that income and be able to travel home to make her or his reinvestments in the home country, and would not create a path to permanent residency in the US.

It will be interesting to watch the anti-immigration forces, many of them on the right, dismiss this WSJ editorial.