On Immigration and Social Security

By Jan 25, 2013, 6:27 PM Author's Blog  

There are two very big issues on America’s plate in 2013; A) what to do with Social Security (SS) , and B) immigration. For the most part, these two topics are uniquely different. There is one important area where they over lap – money.

SS maintains an account called the Earnings Suspense File (ESF). This is account used for booking money that comes into SS from improper SS ID# (SSNs). Credits to ESF can arise from administrative errors. It’s easy to imagine how some one transposes a few digits on the SSN, and the computers at SS recognizes the mistake. Until the error is fixed, the money from payroll taxes on that SSN is suspended in the ESF.

The ESF is not just an account where errors are trapped and later reconciled. It is a doghouse account that has collected well over a hundred billion dollars over the past decade. The vast majority of the money in the ESF comes from workers who are using an illegal SSN.

This site produced the following report on the Earnings Suspense File (ESF) at SS:

On Immigration and Social Security

There is no data after 2010 on the ESF account. I made some conservative assumption for 2011/12, and adjusted it for interest earned starting from 2001. The P&I totals over the past eleven years come to $138 billion for SS and $33B for Medicare. That ain’t hay; for SS it means that 5.3% of the entire SS Trust Fund is ill gotten gains, for Medicare the contribution from illegal workers is equal to 8+% of its Trust Fund.

From 2001 through 2012 the total amount of wages paid to undocumented workers comes to just shy of $900 Billion. Wow! The annual average is $75B. Today, the average documented worker earns $53K a year, this means that 1,400,000 jobs (100+K a month!) might otherwise go to documented workers.

Unemployment is 7.8%. A more desirable level would be 5.5%. To achieve this, approximately 4mm jobs are needed. There are 7+m jobs being filled by undocumented workers today.

It’s tempting to look at these comparisons and reach a conclusion that America could move the needle on unemployment by eliminating undocumented workers. As a practical matter I don’t think that is possible, nor would it be desirable.

This a perplexing problem, and I don’t know what to do about it. However, “Fixing” the problem that exists is something that has to be done. Consider the ESF data:

On Immigration and Social Security

The obvious conclusion from the chart is that when the US economy is strong, illegal workers come. When the economy weakens, the undocumented workers leave. There are signs that the long recession in housing is over. If that is to be the case, then the country can expect a new wave of undocumented workers to come with the recovery.

Given the split that exists between conservatives and liberals on all issues today, it would seem unlikely that anything can be done to make this “right”. That would be a stupid result, there is a hell of a lot riding on the outcome.

Note: If an illegal worker obtains a forged SSN, and uses it to obtain work in the US, then that illegal worker will be entitled to receive SS benefits on exactly the same terms as a legal worker. The only difference is that the illegal worker must receive their SS payments in a bank account outside of the country. What a system!

  • SHARE:
  • Share on StockTwits

One Comment

  1. Daniel Malumis says:

    Thats is not fair. My wife has paid into S.S. her whole life. I have paid into it for over 15 years. I now have paid into a different pension system that does not take out for S.S. Our social security benefits will be offset to ZERO due to the fact we will be recieving from the public employees retirement system. Even though we have paid into S.S. our whole lives. Taxation without representation?

LEAVE A COMMENT

SPY196.43  chart+1.50  chart +0.77%
GOOG539.78  chart-4.20  chart -0.77%
AAPL105.22  chart+0.39  chart +0.37%
TSLA235.24  chart-0.05  chart -0.02%
BBRY10.255  chart-0.055  chart -0.53%
NFLX385.02  chart+1.98  chart +0.52%
FB80.67  chart+0.63  chart +0.79%

Nikkei15291.64  chart+152.68  chart +1.01%
Shanghai2302.28  chart-0.138  chart -0.01%
UK6388.73  chart-30.42  chart -0.47%
France4128.90  chart-28.78  chart -0.69%
Germany8987.80  chart-59.51  chart -0.66%