Immigration and Social Security I used to believe the common (mis)perception that Social Security was doomed from the start due to its "pay-as-you-go" nature. The argument being that since current earners are always paying current retirees, and since people are living longer and longer while having fewer and fewer children, it just stands to reason that eventually the burden of supporting too many retirees by too few workers will break the system.This argument suffers from three problems. First, and least important, extrapolating current trends is nearly always an error. Counter-acting forces usually crop up that bring the trend to an end, or even reverse it. In this case, there is most likely a maximum ratio of retirees to workers that would be very difficult to exceed.Of course, the limit of this ratio could still conceivably be high enough to break Social Security. The second problem is that the argument ignores productivity increases. As productivity increases, it means fewer workers can accomplish the same work, which essentially means the same overall wealth can, in fact, be generated by fewer and fewer workers. For this reason, Social Security could remain solvent indefinitely if productivity keeps pace with the ratio.The third problem with the argument, and its implicit conclusion that Social Security could work if only it had been set up as an individual retirement savings scheme, whereby each generation saves and invests money for its own retirement, is that whether the money is being drawn from current workers' incomes or from stock market pension plans, the value of that money can only be supported by the efforts of current workers. In other words, if the ratio gets too high for the workforce to keep up, then the value of the stock market either crashes, or loses ground to rampant inflation. Whether you're getting your money from income tax or from capital gains, you're dependent on the current workforce producing enough to support the entire population - workers and retirees alike. Individual savings accounts is no solution to the problem.Productivity increase is the only real solution to allowing people to retire in the future. And if productivity doesn't keep up, then retirees will be forced back out of retirement, either by hardship, or by salaries so high they can't refuse.But what's that have to do with immigration? IMO, it'd be ideal if there were no immigration quotas, and anyone who wanted to, could come to the US, work for a few years, and become a citizen. I see only two obstacles to that ideal: entitlement programs, whereby the working force supports non-workers, new immigrants included (think education, medicare, medicaid, social security, welfare, etc); and the basic ability of our economy to absorb new workers. If we allow infinite immigration but keep all our entitlement programs, it could become impossible to keep up with the costs, as people come here and go on welfare until they can find a job, send their kids to schools, and wind up in the emergency rooms without health insurance. One can limit the entitlements that green card holders are entitled to, but we seem to have already decided, as a society, that there are some entitlements we are unwilling to withhold.Of course, if the economy could absorb and employ infinite numbers of new workers each year, there'd be no problem, as everyone would have a job and the increase in the tax base and in the wealth produced would solve all the problems with the entitlements. But I know the economy can't do that, though I'm not sure what it can absorb, exactly.Even if everyone who comes doesn't immediately get a job, our system can support some number of jobless immigrants. If we had fewer entitlements, that number would be greater. And the more immigrants come that eventually find jobs, the greater would be our resources to fund the entitlement programs.Including Social Security.I hope my point is clear: limit immigration at your own future economic risk. I do feel allowing as much immigration as possible is a moral issue, in addition to being an economically beneficial one. I think there are entitlements we would be better off without - education could be greatly trimmed, welfare could be phased out I think (I'm ignoring all other wasteful gov spending, such as much of the military and corporate welfare as being irrelevant to the issue of immigration). And if doing so allows more poverty-stricken people to come to the US and find new lives, I think there's a good moral argument for doing so. But even though moral arguments are rarely persuasive, I'm not sure why the basic economic argument isn't.

I used to believe the common (mis)perception that Social Security was doomed from the start due to its "pay-as-you-go" nature. The argument being that since current earners are always paying current retirees, and since people are living longer and longer while having fewer and fewer children, it just stands to reason that eventually the burden of supporting too many retirees by too few workers will break the system.

This argument suffers from three problems. First, and least important, extrapolating current trends is nearly always an error. Counter-acting forces usually crop up that bring the trend to an end, or even reverse it. In this case, there is most likely a maximum ratio of retirees to workers that would be very difficult to exceed.

Of course, the limit of this ratio could still conceivably be high enough to break Social Security. The second problem is that the argument ignores productivity increases. As productivity increases, it means fewer workers can accomplish the same work, which essentially means the same overall wealth can, in fact, be generated by fewer and fewer workers. For this reason, Social Security could remain solvent indefinitely if productivity keeps pace with the ratio.

The third problem with the argument, and its implicit conclusion that Social Security could work if only it had been set up as an individual retirement savings scheme, whereby each generation saves and invests money for its own retirement, is that whether the money is being drawn from current workers' incomes or from stock market pension plans, the value of that money can only be supported by the efforts of current workers. In other words, if the ratio gets too high for the workforce to keep up, then the value of the stock market either crashes, or loses ground to rampant inflation. Whether you're getting your money from income tax or from capital gains, you're dependent on the current workforce producing enough to support the entire population - workers and retirees alike. Individual savings accounts is no solution to the problem.

Productivity increase is the only real solution to allowing people to retire in the future. And if productivity doesn't keep up, then retirees will be forced back out of retirement, either by hardship, or by salaries so high they can't refuse.

But what's that have to do with immigration? IMO, it'd be ideal if there were no immigration quotas, and anyone who wanted to, could come to the US, work for a few years, and become a citizen. I see only two obstacles to that ideal: entitlement programs, whereby the working force supports non-workers, new immigrants included (think education, medicare, medicaid, social security, welfare, etc); and the basic ability of our economy to absorb new workers.

If we allow infinite immigration but keep all our entitlement programs, it could become impossible to keep up with the costs, as people come here and go on welfare until they can find a job, send their kids to schools, and wind up in the emergency rooms without health insurance. One can limit the entitlements that green card holders are entitled to, but we seem to have already decided, as a society, that there are some entitlements we are unwilling to withhold.

Of course, if the economy could absorb and employ infinite numbers of new workers each year, there'd be no problem, as everyone would have a job and the increase in the tax base and in the wealth produced would solve all the problems with the entitlements. But I know the economy can't do that, though I'm not sure what it can absorb, exactly.

Even if everyone who comes doesn't immediately get a job, our system can support some number of jobless immigrants. If we had fewer entitlements, that number would be greater. And the more immigrants come that eventually find jobs, the greater would be our resources to fund the entitlement programs.

Including Social Security.

I hope my point is clear: limit immigration at your own future economic risk. I do feel allowing as much immigration as possible is a moral issue, in addition to being an economically beneficial one. I think there are entitlements we would be better off without - education could be greatly trimmed, welfare could be phased out I think (I'm ignoring all other wasteful gov spending, such as much of the military and corporate welfare as being irrelevant to the issue of immigration). And if doing so allows more poverty-stricken people to come to the US and find new lives, I think there's a good moral argument for doing so. But even though moral arguments are rarely persuasive, I'm not sure why the basic economic argument isn't.