Medicare and Social Security would see a significant boost in payroll tax contributions if America’s 11 million undocumented immigrants were provided legal status and an earned pathway to citizenship, say health and economic policy experts.
Specifically, if 85 percent of the country’s eligible undocumented immigrants gained legal status and earned citizenship, they would contribute a net gain of $606.4 billion to the Social Security system over a 36-year period, a new report from the Center For American Progress Shows.
It is estimated that undocumented workers would pay $1.2 trillion in Social Security taxes from their earnings, yet only $580.9 billion in benefits would be doled out to them over those 36 years, according to the report.
The potential net gain is enough to fund the retirement of 2.4 million Americans, said Patrick Oakford, an economic policy research assistant at the Center for American Progress and co-author of the report.
“That’s your parents, my parents, grandparents, someone’s neighbor,” Oakford said. “Those retirement benefits will be supported by the undocumented population if we allow them to travel the earned pathway to citizenship.”
The researchers also looked at the potential net contributions to Social Security if only 60 percent or 70 percent of the undocumented population was eligible for legalization and citizenship. And as the number of people eligible for earned citizenship shrunk, the net contribution to the system drastically decreased, Oakford said.
The Social Security system is set to experience some financial strains within the next 36 years, which is why the Center For American Progress’ researchers used that specific time frame.
The oldest of America’s Baby Boomer population, the largest generation in the country’s history, will turn 67 this year. As a result, Baby Boomers will be entering retirement and collecting Social Security benefits for the next 36 years, Oakford explained.
The average adult undocumented immigrant is 36 years old, the report noted. For the entire undocumented population, the average age is about 34, Oakford said.
Undocumented immigrants are going to be working on average for about another 30 years or so before they can receive Social Security benefits, according to the report.
“So they’re going to be helping to carry the weight of our aging population, and they will help alleviate some of the financial strains on those systems,” Oakford said.
As of 2011, non-Hispanic whites had a median age of 42, while Hispanics had the youngest median age at 27, according to the Pew Research Center. The median age for non-Hispanic blacks was 32 and 35 for non-Hispanic Asians.
The Social Security report comes amidst debate in the U.S. Senate over the Border Security, Economic Opportunity, and Immigration Modernization Act Of 2013, SB 744.
The Gang of Eight senators, including U.S. Sen. Dick Durbin (D-IL), drafted the comprehensive immigration reform proposal that provides a pathway to citizenship.
Under the proposal, undocumented immigrants who pay fines and meet other provisions are able to apply for a green card after a 10-year wait period. Younger undocumented immigrants and agricultural workers, however, would have a five-year wait time. Applicants would receive a conditional legal immigrant status while waiting for a green card.
After receiving a green card, immigrants would have to wait an additional three years to apply for U.S. citizenship.
The bill appropriates $4.5 billion for certain border security measures. And the pathway to citizenship is dependent on those security benchmarks being met within a decade’s time.
Oakford added that “without a doubt,” legal status and citizenship would also increase the tax contributions to Medicare as well.
Providing legal status means undocumented immigrants currently working off the books could start working legally and pay payroll taxes, which help fund Medicare and Social Security.
According to the report, there are about 8 million undocumented workers currently in the United States.
As it stands, about 37 percent of those undocumented workers do pay Social Security and Medicare taxes each year, Oakford said.
The Social Security Administration estimated that in 2010 alone, undocumented immigrants contributed $12 billion in Social Security taxes, the report noted.
Many undocumented workers pay into Social Security via a fake Social Security number, explained Alexandra Filindra, assistant professor of political science with a focus on immigration policy at the University of Illinois at Chicago.
And those individuals will never be able to take out that money they contributed even if they earn legal status, Filindra said.
“They’re not going to benefit from that, and that’s several billion dollars already,” she said.
A study released last month from the Harvard Medical School found that from 2002 to 2009, a $115 billion Medicare surplus was produced by immigrants. People born in the United States, however, generated a $28 billion Medicare deficit during the same time frame, according to the study.
Overall, the Harvard Medical School study showed that immigrants contributed much more to the system than they took out in benefits.
Leighton Ku, director of the Center for Health Policy Research at George Washington University, said immigrants are important because they help make the Social Security and Medicare trust funds last longer, “which is good for all elderly Americans whether they’re immigrants or not.”
As the Harvard Medical School study reveals, immigrants play a crucial role in keeping the Medicare system solvent, he explained. And Filindra added that immigrants are not a burden on the health care system.
“Because (immigrants) are disproportionately younger, by about a decade on average, then in that case they are putting in more than they are taking out in any given point in time,” Ku said.
He said it is anticipated that immigrants will continue to be younger than the average native-born population for the foreseeable future.
Also, the country has faced a low birth rate among native-born citizens for years, Ku explained, and immigrants play a vital role is replenishing the country’s workforce.
In addition, a legal status for undocumented immigrants will boost their overall earnings, meaning they will kick in even more tax contributions to social programs, Oakford said. Once undocumented workers are allowed to work legally, they will be more likely to find jobs that best match their skill set and further invest in their own education, he said.
Specifically, undocumented immigrants' earnings will increase by 15 percent if they are provided legal status and another 10 percent with citizenship, according to the Center for American Progress.
“Bringing these individuals out of the shadows, providing them a legal status and a pathway to citizenship will be a net positive for the Social Security system and will help all Americans,” Oakford said.