Rise in Undocumented Workers Could Benefit Social Security Solvency - Brief Article

HR Magazine, April, 2001 by Bill Leonard

At study by economists at Northeastern University in Boston calculates that the number of undocumented foreign workers has swelled over the past 10 years to 11 million--5 million more than the most current estimate from the U.S. Immigration and Naturalization Service.

Since these illegal immigrants are typically young men and many are on their employers' payrolls, the employers are most likely paying Social Security taxes for them, says Paul Harrington, a Northeastern professor and author of the study. "This will contribute substantially to improving Social Security finances down the road," the report concludes.

Other statistics point to the fact that the Social Security system may not be facing insolvency as predicted earlier by several government agencies and watchdog groups. Last year's census revealed a 13.2 percent increase in the population since 1990, and this larger-than-predicted population growth implies that both the Social Security and Medicare programs may not be in such bad shape, says one economist with the Federal Reserve Bank. The growth in the population means more people are entering the workforce than previously estimated, the economist points out.

For several years, analysts have predicted that Social Security will be stretched beyond solvency when members of the baby boom generation begin reaching retirement age in 2010. Most predictions have concluded that the United States simply won't have enough people in the workforce to provide the payroll tax revenue needed to support the overwhelming number of retirees. However, some economists now contend that if immigration--both legal and illegal--continues at the current pace, then the workers-to-retirees ratio will not slip as dramatically and should give both the Social Security and Medicare programs some added breathing room.

Bill Leonard is senior writer for HR Magazine.