Social Security Benefits of Immigrants and U.S. Born
For each year of work under the Social Security System, immigrants realize higher benefits than U.S. born, even when their earnings are identical in all years the immigrant has been in the U.S.. Two features of the social security benefit calculation are responsible: the social security benefit formula transfers benefits toward those with low lifetime covered earnings, and all years an immigrant spends outside the US are treated as years of zero income. Immigrants with high earnings who have worked in the U.S. for only a 10-20 years benefit most from these procedures. If instead earnings were averaged only over the years an immigrant resides in the U.S., and benefits prorated immigrants would receive the same return on their social security taxes as US born who have the same earnings in each year. It is difficult to justify the current procedures determining benefits for immigrants on the basis of income or wealth differences between US and foreign born. Among HHRS respondents, mean total wealth of immigrants is 92% of the mean total wealth of US born, while the mean income of immigrants exceeds the mean income of US born by 3%. But income and wealth are less evenly distributed among foreign born than US born. Depending on whether the appropriate period for calculating benefits is taken to be 35 or 40 years, prorating would reduce the present value of benefit payments to the cohort of immigrants born from 1932-1941 (91% of the HRS cohort) by $7.5 billion or $15 billion respectively. The 1932-1941 cohort represents 1/7 of all foreign born who are now 25-64. We also ask whether, from a selfish financial viewpoint, US born participants would have preferred to have immigrants from the HRS cohort included in social security. The answer is yes. Despite their better deal, most immigrants in the HRS cohort will pay more in taxes than they will receive in benefits, although just barely.
|Date of creation:||Mar 1998|
|Date of revision:|
|Publication status:||published as Issues in The Economics Immigration, Borjas, George, ed., Chicago: University of Chicago Press, 2000, pp. 309-350.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan L. Gustman & F. Thomas Juster, 1995. "Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis," NBER Working Papers 4996, National Bureau of Economic Research, Inc.
- Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, 1997.
"Pension and Social Security Wealth in the Health and Retirement Study,"
NBER Working Papers
5912, National Bureau of Economic Research, Inc.
- Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, . "Pension and Social Security Wealth in the Health and Retirement Study," Pension Research Council Working Papers 97-3, Wharton School Pension Research Council, University of Pennsylvania.
- Olivia Mitchell & Jan Olson & Thomas Steinmeier, 1996.
"Construction of the Earnings and Benefits File (EBF) for Use With the Health and Retirement Survey,"
NBER Working Papers
5707, National Bureau of Economic Research, Inc.
- Olivia S. Mitchell & Jan Olson & Thomas Steinmeier, . "Construction of the Earnings and Benefits File (EBF) for Use with the Health and Retirement Survey," Pension Research Council Working Papers 98-19, Wharton School Pension Research Council, University of Pennsylvania.
- George J. Borjas, 1992.
"National Origin and the Skills of Immigrants in the Postwar Period,"
in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 17-48
National Bureau of Economic Research, Inc.
- George J. Borjas, 1991. "National Origin and the Skills of Immigrants in the Postwar Period," NBER Working Papers 3575, National Bureau of Economic Research, Inc.
- Feldstein, Martin & Liebman, Jeffrey B., 2002.
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324
- Gustman, Alan L & Steinmeier, Thomas L, 1985. "The 1983 Social Security Reforms and Labor Supply Adjustments of Older Individuals in the Long Run," Journal of Labor Economics, University of Chicago Press, vol. 3(2), pages 237-53, April.
- Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1994. "Retirement Research Using the Health and Retirement Survey," NBER Working Papers 4813, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6478. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.