Aging Migrants Could Impact Retirement for All Americans

Authored by Loren Steffy and originally published on rationalmiddle.substack.com

Aging undocumented immigrants present a double-edged crisis for the American economy. You won’t hear about it on the campaign trail, where border security dominates the discussion, but it could have a profound effect on all Americans.

An estimated 10.5 million immigrants are living in the U.S. illegally, according to the latest estimate by the Pew Research Center. As of 2022, about 99,000 of them were aged 65 or older. That number will grow as the undocumented population ages.

For most of the undocumented, there is no retirement plan. They will simply try to work as long as they can, and then get by. As their medical needs increase, they are likely to place a heavier burden on the health and social services safety nets.

At the same time, undocumented immigrants who managed to get on payrolls have contributed billions to Social Security — benefits they will never collect because they are ineligible. (The last year in which the Social Security Administration studied the issue was 2010, and undocumented immigrants contributed about $12 billion to the fund.)

Social Security, of course, needs all the help it can get. America’s aging population creates an inescapable math problem. People are living longer, and the biggest segment of the population is in or approaching retirement. That means more people are drawing more out of the system than they put in.

Despite what many like to believe, Social Security was never about saving for retirement. The compact was more direct: people in the workforce today pay the retirement for those who came before them. With a declining birth rate, there aren’t enough native-born Americans to keep the system functioning.

Immigration, legal or otherwise, represents the fastest way to shore up the shortfall.

As former Fidelity Investments presidents Robert Posen notes:

“Immigrants are most likely to arrive as working-age, taxpaying adults, whereas it usually takes almost two decades before native-born Americans make appreciable payroll-tax contributions. The 2024 Social Security trustees’ report contains a sensitivity analysis showing that if future immigration were 35% higher than is now projected, Social Security’s financing shortfall would be reduced by 11%. Immigration can’t eliminate Social Security’s financing shortfall, but it helps.”

Some immigration advocates argue that the undocumented who have worked in the U.S. for decades deserve assistance as they age. Others say that because they’re in the country illegally, they deserve no support — not even those Social Security benefits they paid for.

But we’re thinking about the problem wrong. It has less to do with the current costs, or even the cost of the current generation.

In 2017, the National Academies of Sciences, Engineering, and Medicine found that first-generation immigrants cost the government more than native-born citizens. That’s not surprising, because immigrants tend to have lower incomes, which means they pay less in taxes, and they have more children than native-born Americans, which means they put a greater strain on public systems like education. However, the children of immigrants are among our biggest economic contributors, because they tend to be better educated than their parents (many immigrants come here to provide a better future for their children) and they adopt the American way of having fewer children. As a result, they contribute more tax revenue than their parents — and more than many other native-born Americans.

Those findings have been consistent over the course of American history. Immigrants often come here to meet demands for labor, especially for jobs Americans don’t want to do, but their descendants add to US economic output. They are the key ingredient that has made America’s economic engine a global powerhouse for almost 100 years.

We often use terms like “flood,” “wave,” “burden,” and “threat” when we talk about immigration. Those are short term fears, many of which aren’t supported by facts. The terms we should be using are “investment,” “contribution,” and “economic rejuvenation.”

If we continue to allow short-term thinking and fear to dictate immigration policy — or give Congress an excuse for not updating that policy — then our immigration crisis is going to become a retirement crisis that will affect all Americans regardless of where they were born.

Loren Steffy is the co-author of Deconstructed: An Insider’s View of Illegal Immigration and the Building Trades and executive producer of the Rational Middle Immigration series.