The Impact of Immigration on Social Security and Medicare: A Conceptual Primer
By Jason Richwine on April 11, 2023
Summary
Despite oft-heard claims that immigration will bolster Social Security and Medicare, the reality is more complicated. Much of the confusion stems from conflating the impacts of different policies. Toleration of illegal immigration, amnesty for illegal immigrants, and legal immigration are distinct policy choices that require separate analyses. This article explains conceptually how each of these immigration policies would impact the financial health of Social Security and Medicare.
Key points:
Illegal immigration unambiguously benefits the Social Security and Medicare trust funds, but amnesty (legalization) would reverse those gains and add extra costs.
The impact of legal immigration depends largely on age of arrival and income. Immigrants who arrive young and have high earnings will be net contributors to the trust funds, while later-arriving and lower-earning immigrants will be net drains.
Recent declines in fertility imply that legal immigrants who are net drains in their own lifetimes will not have enough children to make up the difference in the next generation.
A continuous inflow of working-age immigrants could appear to have a positive effect on the trust funds even as the immigrants are lifetime net drains. However, this Ponzi-style funding strategy would be difficult to sustain.
This report concludes that immigration is not a practical means of avoiding tax increases and benefit reductions when addressing the future solvency of Social Security and Medicare.
https://cis.org/Report/Impact-Immigration-Social-Security-and-Medicare-Conceptual-Primer
