Could Immigration Reform Gut Social Security or Cost You Your Job?

If you think that immigration reform doesn’t impact you directly, you may be very wrong. This week, the Senate is picking up this contentious topic. Their move follows the passage of an immigration bill in the House of Representatives that would make illegal immigration a felony and which excludes a guest worker program. But any version of the bill considered by the Senate is likely to include a guest worker program. Although nobody has been talking about it, the passage of such a program is likely to cost Americans billions of dollars, lead to an increase in Social Security taxes, hasten the insolvency of the Social Security System and could cost you your job.

 

The truth is that illegal immigration impacts all Americans. For those at the lower end of the economic ladder the impact is the most negative, but people at all points on the economic ladder are feeling the pressure. According to a 2005 Bear Stearns study, millions of jobs have shifted from American citizens to illegal aliens over the past five years. The reason for this shift is simple. Illegal aliens will work for much less than Americans will.

 

The net effect of this is that illegal immigration is forcing down wages for everyone else. At the same time, it strains the resources of local communities, states and the federal government. Illegal aliens have their children educated in our schools, use our roadways, parks and other public facilities, and are even provided with free health care; a benefit which millions of uninsured Americans would love to have. They receive these benefits even though most of them pay absolutely no taxes.

 

Even so, the government has largely turned a blind eye toward the problem. The reasons why boil down to three things. Courting Hispanic voters, campaign contributions from employers who want access to cheap labor, and a limited amount taxes which the government collects from illegal workers (these act as a tax subsidy to governments).

 

Ignoring the law to court votes and shore up campaign contributions from business interests hurts everyone else in the country, including legal immigrants. It artificially forces down wages, increases unemployment, and creates conditions that can lead to poverty for Americans.

 

But implementing a guest worker program, or just shutting the door to illegal immigrants, will also hurt everyone from a tax perspective. Though many illegal aliens pay no taxes, a large number of them do get jobs with legitimate employers by using false documents. Under these circumstances, payroll and Social Security taxes are paid.

 

Note: The false documents that are used are often made using legitimate Social Security Numbers that are stolen. In other words, illegal immigration is also contributing to the issue of identity theft.

 

The most recent estimates are that illegal immigrants and the companies that employ them contribute about $7 billion each year to Social Security taxes. That money never gets paid out in the form of retirement benefits. In effect, it subsidizes Social Security for everyone else.

 

If Congress enacts a law that make hiring illegal aliens a felony, that $7 billion goes away. If they pass a law that includes a guest worker program, the money will likely be paid out in the form of benefits. In effect, this means that the money collected will not benefit the American people either. Either way, the money will have to be made up in the form of higher Social Security taxes. The only way to avoid this is to address the issue in any law passed.

 

There is little doubt that the United States needs some form of guest worker program. But any such program needs to be coupled with hard caps on the number of guest workers admitted, should not lead to amnesty for illegal immigrants, and should be coupled with strict and enforceable border controls. Employers who abuse the system by hiring from overseas when qualified Americans are available for the job, as many have done with other visa programs, should face stiff fines that can be enforced at either the federal or state levels of government.

 

Any new law should recognize that guest workers should not necessarily have all of the benefits of American citizens while living and working here. This may mean that guest workers are required to pay into the system without ever having a possibility of collecting benefits. It should definitely mean that guest workers should not be entitled to benefits that Americans are not, such as free or subsidized healthcare. And any benefits they do receive should have to be paid for, including the schooling of any children they may have. These costs should have to be picked up either by the guest workers themselves or by the companies that hire them, leveling the playing field for unemployed Americans.

 

Congress needs to keep in mind that allowing low wage labor into this country but not charging that labor enough to cover their cost to tax payers just adds insult to injury. It forces Americans to subsidize their own lower wages and the higher unemployment numbers that are directly attributable to cheap immigrant labor.

 

ACCESS urges Congress to proceed very carefully on immigration reform. The issue is emotionally charged for many, but the issue needs to be addressed with economics of American households in mind. If Congress is not cautious, any action taken could actually gut Social Security and threaten the jobs of millions of more American citizens.

 

If you would like to let your senators know how you feel about immigration reform, call them. You can get their phone numbers by typing your address and zip code into the boxes in right hand column of this page.

 

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