One of the pluses of immigration reform is an increase in young workers whose payments into Social Security could shore up the system. Social Security and others estimate that if allowed to take legal employment, these workers would earn about 20 percent more than they do now, and they and their employers would pay a commensurately greater amount of wage tax.
The Senior Citizens League, a nonprofit that advocates for the rights of older Americans, is questioning what kind of impact illegal work will have on Social Security benefits after immigration reform. In a statement, the organization's Chairman Larry Hyland says, "These are costs that neither the Congressional Budget Office nor the Social Security Administration have fully disclosed to the public."
Social Security is already getting a boost from immigrants working illegally. In April, Social Security calculated that unauthorized immigrants contributed about $13 billion in payroll taxes in 2010, while receiving only $1 billion in benefit payments that year. Social Security says that most of these recipients had permission to work at one point in their working lives and are now living in their native countries and collecting retirement benefits they earned while working legally.
The remaining $12 billion, which were collected in 2010 primarily from workers with fraudulent Social Security numbers and from those who once had legitimate numbers but no longer do, were added to Social Security's available funds.
What happens when currently undocumented workers receive amnesty? While less than 5 percent of these immigrants are currently older than age 50 and the largest number are between 25 and 34, we all get old, and eventually these workers will do some retirement planning and collect Social Security benefits. To claim Social Security, you must have worked 10 years, although you can get it after less work if you're disabled. You need 35 years of work to receive full benefits. It is possible to accumulate 50 years' worth of benefits if you started working at 16 and don't retire until 66, which is currently full retirement age. Working those additional years only makes a difference if they erase lower-earning years.
The Senior Citizens League would like the immigration reform law to explicitly prevent immigrants who worked without authorization from getting any benefit from the wage taxes that they paid into the Social Security system during the time they weren't authorized to work.
Social Security estimates that 1.8 million immigrants in 2010 worked and paid into Social Security under a name and number belonging to someone else. If the names and numbers matched, then that person got the credit even though they didn't do the work. When the names and numbers don't match, the money goes into the Earnings Suspense File, where most of it is ultimately used to pay benefits for the rest of us. In order to claim benefits in either of these circumstances, immigrants have to prove they did the work and deserve the credit. Social Security says, "The requirement to document ownership of reported taxable earnings in the past is a high hurdle, and meeting this requirement seems to be more the exception than the rule."
I think if it makes lots of older Americans feel better about immigration reform to make sure that one-time unauthorized workers don't benefit from the Social Security they earned during that period, then by all means, include this rule in the immigration reform law. But in the long run, it won't make a scrap of difference.