Will Social Security Be Around When You Are Ready To Collect?
(Labor Participation Rate and Immigration)
ByRaymond D. Matkowsky
Will Social Security be around when it is time for you to collect? Some people say no. It should be said that this has been happening for years. Some people say “of course the government wouldn’t let us down there are too many votes at stake and it is our money anyway.†Some people are not sure and just plain worried. Which are you?
In the past I have written about the need for more labor to quell inflation. There is more to labor participation than quelling inflation though. There is a whole laundry list of problems that can be solved by increasing the number of people in the labor pool.
Some United States’ (U.S.) labor history is in order. At the end of 2000, the labor participation rate was 67.3%. The labor participation rate is calculated by dividing the sum of all workers, employed or actively looking by the total working age population. By October of 2002 it was 66.6%. As of February this year, it was 62.4%. This represents about 6 to 8 million workers lost since the year 2000.
Workers 55 years old or older represent the largest fraction of the U.S. population. This suggests that the numbers will only get worse as these personnel retire. Plus, these demographics are not going to change soon. Simply put, while the non-working population increases, the labor force supporting that population is decreasing.
The most serious problem we face is Social Security and the Tax Base. Increasing populations will require increasing expenditures. In a democracy, the only sources of government income are people. Businesses have a shortage of workers also. It will only get worse if nothing is done.
Immigration
Let’s be clear. When I speak of immigration, I mean legal immigration. One problem that must be solved immediately is that the United States must offer a way for immigrants waiting for an asylum hearing to work and be productive.
Presently, asylum seekers cannot apply for an Employment Authorization Document until there has been no action for 365 days. Prior to August 25, 2020, it was 150 days. Both timelines are too long and need to be changed. Not to do so is a waste of valuable human resources that is sorely needed. Due to the complexities of the system, a seeker should have the aid of a qualified attorney. A seeker must file a Form I-765 after applying for asylum.
Corporations cannot sponsor an asylum seeker directly. However, there may be ways around this. Again, an experienced attorney is needed. It might be financially profitable for a company to make the effort. It might also be a good “corporate citizen†advertising subject.
69.1 million people were covered by Social Security (SS) in 2019. Most immigrants, at best, get only a small portion of SS benefits or are a long way off before they can collect. Undocumented immigrants often pay into the system and never collect because of their undocumented status. Social Security now requires forty work quarters (ten years) to collect benefits. Because immigrants tend to be young, they pay taxes immediately and receive benefits many years later.
Immigrants already comprise a substantial portion of U.S. workers. 36% of farm workers are immigrants. They comprise 27% of food workers and 24% of administrative and support services. They are involved in the accommodation industry, the construction industry, and manufacturing. Immigrants and their families have been found to be upper mobile. They are consumers also. They buy cars, houses, furniture, food, clothes, and vacations. Plus everything that anyone else does. Immigrants are important to our economy and communities. Businesses should definitely not discount them. Individual jurisdictions should not discount them either.
Cultural Differences
Europe has welcomed many Middle Eastern immigrants fleeing the chaos of that part of the world. One country, in particular, experienced many cultural problems though. I feel that these problems were self-inflicted. The leader of that country welcomed the influx of needed labor. However, the government’s position was that they will make “good ______†out of them.
Immigrants do not want to be changed. Trying to change them implies there is something wrong with their culture. Coming from an immigrant family, I have observed that over time immigrants adopt the ways of people around them without giving up all of their culture. Cultural ties are a necessary part of their heritage and shouldn’t be disparaged.
Birth Rate
Over the past 70 years fertility rates have decrease worldwide. There have been occasional upward spikes, but the general trend has been down. The United States is actually in a better position than many developed nations. Other populations have aged to a greater extent than in the United States.
The total decline in fertility rates has been around 50% in the last 70 years. Reasons include women’s workforce entry, lower child mortality, and the high cost of raising children. Whatever the reasons are a nation cannot count on birth rates increasing. The only way left to increasing the population and workforce is through immigration.
All Benefit
Social Security is expected to run a deficit by 2035 and only be able to payout 70% of what it does now. This would be a disaster for people who depend on SS for the major portion of their income. Even well-to-do people would suffer. Recently, a review concluded that those that save $250,000 for retirement and live in the northeast can only expect that money to last four years. A million dollars would only last 16 years. People can fully retire at 67 and live until 90. Their money would run out many years earlier.
Clearly, we need to get more money into government coffers in order to avoid such a catastrophe. The only two ways to do that is to have workers and employers pay more in payroll taxes or have more people pay into the system. The only way to get more workers is through immigration.
Again, I am not saying we should have uncontrolled open borders. Sensible laws need to be enacted and followed. Anything else would over-stress society and would be just as disastrous as doing nothing. However, opening up more immigration and working up to a predetermined labor participation rate in steps may make sense. We may not get to a participation rate of 67% soon, but every increment would help put off insolvency.
Business is presently short 11+ million workers in the United States. That figure is too large to ever make up through human resources. But, increased immigration could put a dent in it. Immigrants can be a large human resource when one is sorely needed. By utilizing immigrants while they are waiting for their immigration hearing, industry may be able to help itself and the nation by sponsoring and offering temporary jobs. Most of these people desire productive work.
It is a win-win situation for immigrants, business, governments, and retirees if Social Security benefits are paid in full in 2035 and beyond. The easiest method is to get more people to pay into the system and increase the tax base. For that you need an increase in labor participation. You are not going to get it through increasing birth rates. Therefore, you need immigrants.
If you have any comments, let us know. Email me at rdm@datastats.com. We will try to print it in our next newsletter.
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