by Marlene Lee, senior research associate, Domestic Programs
In response to my earlier blog post on immigration and social security, researcher Dowell Myers makes the valuable point that considering immigration as a solution to the Social Security financing problem is not an “all or nothing” proposition. Immigration may be part of a solution, reducing the old-age dependency and helping to reduce the deficit of the Social Security program (see Social Security Advisory Board’s estimate of reduction). In his work, Myers estimates that feasible levels of immigration could reduce the old-age dependency ratio by 25 percent. Both Myers and Reich in their NPR interviews suggest that the policy solutions for Social Security should include immigration.
However, research suggests that increased immigration may have drawbacks for vulnerable populations that other policy options do not. George Borjas and other scholars provide evidence that immigration is most likely to hurt low-income workers. (For information on immigrant characteristics, see MPI report on immigrants and recession, and for a readable account of Borjas’ argument see NYT Magazine contributor Roger Lowenstein’s article “The Immigration Equation”) If one accepts the premise that immigrants reduce job opportunities for low-income workers, particularly visible minorities—a big if —then a solution that includes high levels of immigration might well affect the Social Security earnings of low-income and minority workers. This is because individuals’ eligibility for and level of Social Security benefits are tied to their earnings history.
Teasing out the effect of policy on different population groups is always difficult. And certainly many economists would argue that to the extent immigrant workers contribute to small business growth and spend their earnings in the United States, they may ultimately increase job opportunities. In any case, other policy options such as raising the Social Security payroll tax or changing the rules so that high earners pay Social Security taxes on all earnings, not just the first $106,800, do not disproportionately affect low-income workers. Also, let’s not forget that part of the equation for Social Security solvency is the labor force participation rate. Increases in women’s labor force participation rates had a positive impact on labor force growth, thereby increasing contributions paid into Social Security. Certainly even with the same old-age dependency ratio, if women’s labor force participation rates had not risen over the previous four decades, the Social Security financing gap would be larger. But these rates have stabilized, and the women who helped fuel economic growth will be among those collecting Social Security in the next 30 years.
A high rate of labor force participation among immigrants is one of the reasons that more immigration might work as part of the answer to the gap in Social Security funding. Higher labor force participation rates among native-born minorities also have the potential to increase growth of the labor force and future contributions to Social Security, just as increased female labor force participation did. But, this potential solution is not often mentioned in the current debate, perhaps because it is not perceived to be as easy to achieve as expanding immigration.
by Marlene Lee, senior research associate, Domestic Programs
This year, for the first time Social Security will take in less in taxes than is paid out in benefits. And by most estimates, the Social Security Trust Fund—designed to cover exactly this type of shortfall—will be exhausted around 2037. A few weeks ago, Robert Reich, Secretary of Labor under President Clinton and Professor of Public Policy at the University of California at Berkeley, proposed immigration as an easy answer to the Social Security funding crisis, or at least as one factor in the combination of steps needed to address this crisis. Reich says that increased immigration would likely have a greater impact than any other proposed measures, such as raising payroll taxes and the age of eligibility for social security benefits. His argument rests on immigrants’ younger age than non-immigrants and on his attributing the Social Security funding crisis to the decreasing number of workers per retiree. According to Reich, logically and simply, increasing the number of immigrants will increase the number of workers per retiree because young immigrants will work for decades to come.
Used under Creative Commons license from AFL-CIO.
But as many demographic studies suggest, the amount of immigration needed to produce the desired elderly dependency ratio (the retirement age population divided by the working age population) may not be desirable or achievable. In a PRB online discussion, Ronald Lee, a Berkeley economist and demographer, said he estimates that 395 million immigrants would be needed. UN estimates are even higher. Also, there is the question of how long it takes immigration to change a population’s age structure. Immigrants entering the United States will themselves age, some becoming eligible to participate in Social Security. Ken Johnson from the University of New Hampshire and Dan Lichter from Cornell University show that higher fertility among some immigrant groups fuels natural increase in areas where the population would otherwise have declined. But the impact of immigrant fertility on a population’s age structure takes a long time to manifest itself.
Finally, immigration may help close the financial gap in Social Security through its effect on economic growth. But economic growth depends on both the growth rate of labor and the growth rate of labor productivity. The effect of population aging on labor productivity is complex, particularly in an era of improved health among the older population and rapid technological progress. Historically, changes in the amount of capital available per worker as well as the pace of technology and the experience of the workforce have been the main factors that affect labor productivity. Alan Greenspan recently concluded, “…it is heightened growth of output per worker that presents the greatest potential to boost the growth of gross domestic product. A significant rise in the growth of labor productivity will be necessary if the standard of living of retirees is to be maintained and that of workers is to continue advancing.”
The effect of immigration on labor force growth seems pretty obvious, if not quite as simple as Reich argues, but its effect on labor productivity seems less obvious. Immigration’s effect on labor productivity would depend on the composition of the immigrant population. In the United States, the immigrant population includes both low-skilled and highly skilled workers, but the global competition for skilled workers has increased, keeping some potential skilled immigrants in their home countries or drawing them to countries other than the United States.
by Mark Mather, associate vice president, Domestic Programs
The population in America’s largest cities is booming, according to new data released today by the U.S. Census Bureau. Just a few years ago, the annual growth rate in the 10 largest cities was around 0.5 percent per year, around half the national average. But the latest figures, from 2008, indicate that the population in America’s 10 largest cities is growing faster than the population living outside of those areas.
(click on figure to view a larger version)
So what’s driving the change? There are a couple of factors at work. First, big cities are still important destinations for immigrants, who tend to be younger (of reproductive age) and create a lot of population momentum. Second, given the rising unemployment rate and drop in home prices around the country, fewer people are making long distance moves to places like Florida, or even local moves to the suburbs. Chicago, once a perennial population loser, is now growing faster than several former boom towns, including Jacksonville, Las Vegas, and even Cape Coral, Florida, which, a few years ago, was one of the fastest growing cities in the country.
The question for Chicagoans: How long can it last? When the economy bounces back, will people start leaving Chicago en masse? Population trends are closely linked to job trends so future population growth in big cities such as Chicago depends, in part, on their ability to keep people employed.
The Global Forum on Migration and Development, a global initiative within the framework of the UN General Assembly is having its annual meetings this week in Manila. This got me to thinking how global patterns of migration have changed and how they continue to change. A century or more ago, the big story would have been unfettered migration to that grand, nearly empty, continent, America. Hard economic times and famines drove many migrants from Germany, Ireland, Sweden, and the like. Anyone who could afford a ticket could become one of the newest Americans. That “escape valve” is no longer unregulated and migrating to the United States and Canada is no longer the free-for-all it once was.
After World war II, Europe began to have the American experience more and more, receiving increasing numbers of migrants from former or existing colonies or as “temporary” guest workers. Much of that was facilitated by the airplane. People used to note that planes to New York from San Juan came in full and went out empty. Now we see a rising tide of ‘south-south” migration. Just as the kinetic pull of higher wage rates pulls migrants from Mexico to the United States, so do migrants from Guatemala enter Mexico. So many Bangladeshis flood into India that India is once again planning a border fence.
Many national reactions to these streams of migrants have been schizophrenic at best. The UK seemed to have a liberal policy toward new EU migrants but now enthusiasm for non-English-speaking migrants is waning. There is now a debate about adopting an Australian style point system. With few exceptions, it seems that the world wants to move to a world without migration even if more hands and more workers paying taxes are actually needed. Maybe the population bomb has found its fuse.
