President Trump has proposed deporting hundreds of thousands of immigrants and backed curbs on legal immigration into the US. The president’s aggressive views on immigration have generated intense debate over the past year, but much of that discussion has ignored a key issue: What immigration restrictions would mean for the long-term health of Social Security.
A new study by my Urban Institute colleagues Damir Cosic and Rich Johnson finds that just one proposal—a Senate bill to reduce the number of permanent residency visas (green cards)– would increase unfunded Social Security obligations by $1.5 trillion, or 13 percent, over the next 75 years. In the nearer term, it would accelerate by one year the date by which the Social Security trust fund is projected to be depleted—from 2034 to 2033.
Fewer workers = less payroll tax revenue
This would happen in a pretty straightforward way: The bill, introduced by senators Tom Cotton (R-AR) and David Purdue (R-GA), would immediately reduce the number of newly-issued green cards by 41 percent, and in ten years cut the number of such new visas of half. Currently about 1 million people are granted lawful permanent residency status each year. The measure, called the RAISE Act, also would eliminate the so-called visa lottery that allows about 50,000 immigrants into the US annually and change the rules for those seeking employment-based visas to give preference to younger and better-educated workers.
The result: Damir and Rich estimate the net increase in lawful permanent residents in the US would fall from more than 800,000 annually to less than 400,000. Assuming the growth of native born workers remains steady, the RAISE Act would reduce the employed labor force by 2 million in 2030, 6 million in 2050, and 8 million in 2070. All else equal, fewer workers means less payroll tax revenue equals a bigger Social Security shortfall. Although the number of retirees would also fall, lost tax revenue from barring immigrant workers would exceed the decline in benefits paid to those workers in retirement.
One of many proposals
Some of the lost revenue would be offset by a change in the mix of green card holders. Today, about two-thirds of those granted permanent residency status are relatives of citizens or legal residents, and many come to the US with low skills. By increasing the number of younger, better educated immigrants, the RAISE Act would boost average earnings of new residents. That would offset some of decline in payroll tax revenue, but not nearly all of it.
As a result, Damir and Rich estimate the law would reduce Social Security trust fund revenues by 0.8 percent in 2020, by 2.3 percent in 2030, and by 8 percent in 2070. However, benefits would not begin to decline significantly until 2050.
Keep in mind that this paper looks at only one of the anti-immigrant proposals on the table. Others include the president’s proposal to begin deporting in two weeks 690,000 unauthorized immigrants brought to the United States as children, and his proposal to deport another 300,000 Haitians and central Americans who came to the US under a humanitarian waiver known as Temporary Protected Status. In addition, the number of the workers applying for H 1-B visas has declined by 15 percent in the past year.
Effects on personal care workers
These changes would result in a further decline in the US labor force, lower payroll tax revenues, and place additional pressure on Social Security beyond the effects of the RAISE Act.
Some supporters of immigration curbs and deportations argue that these jobs will be filled by native born Americans, thus the projected payroll tax shortfall will not materialize. However, the single biggest reason economies expand is growth in their labor force, and pulling hundreds of thousands of workers out of the US job market is counter-productive. Besides, with the economy at close to full employment and little interest among native-born people in doing the physically-demanding, low-skilled work done by many immigrants, there is no credible evidence that foreign-born workers are taking jobs from the native-born.
Finally, I’d be remiss if I didn’t mention one other consequence of immigration limits and deportation—the effects on those receiving assistance from personal care aides. In much of the US, these aides are overwhelmingly immigrants. They do difficult work for low pay and are essential to meet the needs of older adults and younger people with disabilities. And many of those aides could be deported or denied visas under the president’s immigration policies. But that’s another story for another day.
Whatever you think about the immigration debate, it is important to take into consideration what limits on entry into the US or deportations will mean for the future of Social Security.