Saturday, April 10, 2010

Will More Immigration Save Social Security?

Robert Reich says so, "Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess", which is also linked to by Mark Thoma. He has been on the Social Security Advisory board and has heard all the tales of coming Demographic Doom due to the impending wave of boomer retirements, even though the adjustments due to the Greenspan Commission in the early 80s were supposed to pay for the boomers' retirements. This year the fund is running a (small) deficit, and so out of all the sources of the broader federal budget deficit (of which rising medical care costs, not to mention high defense budgets) it is social security that is the Big Problem that Something Must Be Done About (along with Medicare). I would agree that more immigrants will help in the short run, but demography is not the main problem here.

I and Bruce Webb have posted only about a million times in the past here and elsewhere on how if the "optimistic" projection of the SSA were to hold, the system would never run a deficit. In many recent years the economy beat that projection. However, in the last few it has plunged far below the pessimistic forecast with fica revenues collapsing as employment has collapsed in the Great Recession. This is the problem, and the simple solution is to get the economy and employment growing again at something like the optimistic forecast rate. Then the system will go back into surplus, possibly even mostly staying there, without any fiddling with or opening the doors to massive immigration (and, no, I am not anti-immigrant at all here, just trying to be clear about what is what).

Indeed, the fallaciousness of this general demographic hysteria is seen in that the US has among the best demographics for this even with low immigration compared with other OECD economies. Germany (and others) have the age distributions the US will have in 2030 when we hear Doom will hit, and they are paying their pensions all right, with Germany's even higher than the ones here. Really, folks, higher immigration may be an OK thing, but it is relatively peripheral to the condition of the Social Security system. Growing the economy and particularly employment is the key to saving the system.


run75441 said...

Hi Barkley:

This is agreat post and it is to bad no one else has read it. Job Creation would do a world of good. The Dems lost MA because they didn't address jobs.

And you are correct, we are still a relavitively young nation with the median age around 36. We are also replacing ourselves at 2.05.

r l love said...

I think that increasing immigration levels is a good idea. With an influx of immigrants, the indigenous population will then be free to elevate to careers in financial services, health-care, and to essentially those vocations that offer higher compensation, especially in those areas that require little or no training. (real estate sales, mortgage brokering, drug dealing, racketeering, etc.) $$$

Considering the current unemployment dilemma, and assuming that immigration will worsen our job issues, it may seem that increased immigration makes little sense right now, however, as often happens in the field of economics, things are not what they seem. First, nearly all liberal economists who will say anything to attract attention to their work, agree, that immigration is good for the economy. Second, even if increasing immigration during a period of high unemployment does cause an oversupply of labor, there is a simple supply and demand solution. Studies have shown that unemployment drives up the demand for entertainment, mostly in the form of TV programs. This, naturally, increases the demand for celebrities and they in turn elevate the demand for a wide range of support personnel. More entertainment also means more CEOs etc. and so as implied previously: $$$. Of course some viewing will need continued subsidizing, but that will almost certainly be offset by the increased economic activity due to the massive gains from the additional celebrities and all of what that implies: $$$ (don't forget that professional athletes also qualify as 'celebreties'):$$$

So, with the unemployment questions presumably answered, there is a type of immigration which is problematic. That is of course the influx which spills across our southern border. It is not however the immigrants themselves who are the problem. Most Hispanic immigrants are decent and hardworking people who I have nothing but respect for (I allowed my gardener to use a bathroom in my home once), the problem is instead the fact that drugs are being brought across our southern border right along with the immigrants. Again though, there is an easy solution, we simply need to create the incentives that shift the influx from the south to the north.

Canadians do not of course rely heavily on a particular food crop in a similar way to what the Mexicans rely on corn. So driving working-class Canadians from their homes in search of work will not be as easy as subsidizing a single crop such as corn. Canadians do however rely heavily on their timber industry. So, obviously, we simply subsidize our timer industry as needed, $imple, the drug problem is solved with the added benefit of gaining workers who speak our language. $$$

Ray L. Love

Eleanor said...

I have questions about growth as a solution, rather than a steady-state, sustainable economy. However, this is not a problem short term since there is huge amount of work to be done rebuilding infrastructure, converting to new sources of energy, changing how agriculture is done in this country and helping the rest of the world. Maybe my problem is what growth means in this society. I'd sooner talk about change and reallocation of resources.

TheTrucker said...

I used to think that the economics profession was a big reason for this lack of change, and I still do. But I have come to realize that fascism trumps economics and rationality. Too many people are simply not rational. Fear and self preservation instincts are more powerful than reason. So no matter what the economic profession does, it cannot induce change in a world where change is anathema to power and control. Those in control do not want any change and those not in control know they can take control through sewing fear and distrust of those who are. It always gets down to a game of "boogerman" and "war" and playing on the fear of losing ones current station.

Barkley Rosser said...



r I love,

In the short run during a recession immigrants aggravate the unemployment situation, and indeed they realize this and immigration has been down notieably in the last year or so without any extra enforcement efforts. However, in the longer run, they bring more aggregate demand and do not damage employment.


Right now is probably not the time for moving to a steady state economy, but I would note that in the longer run the issue is really material throughput, something that Herman Daly agrees is the issue. So, services and their qualilty can improve and provide jobs without necessarily requiring an increase in material throughput, which is the most important part of the steady state economy.


You're probably right, but I at least will continue to shoot off my mouth until it closes on its own or somebody closes it for me.

r l love said...


The 2 largest influxes of immigrants were followed by the 2 periods of the highest unemployment. From 1900 to 1917 14 million + immigrants came and by 1921 wages began to fall. By 1929 71% of the population lived below poverty and of course even most economists know what occurred in 1929. (what economists do seem unaware of is that if we were to bring all of our soldiers home as we did in 1918-19, we may well have unemployments levels as high as those of the Depression era. it is conceivable that immigration creates an incentive barrier to ending conflicts etc.)

The other large influx began of course with The Immigration Act of 1965. This increased the population more slowly in percentage terms although wages followed a very similar trend line to that of the 1920s but over a longer period of time. You know the rest,(I think of you as well above average among economists).

Anyway, when economists can explain 'job creation' in a way that can be shown to work, sustainable, based on waste-less consumption, and when a super-majority of economists agree that the math is sound, then perhaps we commoners will accept presumptions on "aggregate demand"; but until then the sweeping unsupported explanations are insulting.

Plus, when the ethereal theories fail to match-up with the empirical references, and when those theories repeatedly favor those who decide the fate of economists, it gets more than a little suspect.

Sincerely, Ray L. Love (from down along the border for 54 years [not fond of Northerners who think they understand immigration])

Anonymous said...

More very poor immigrants who pay very little taxes and consume large amounts of public services -- and with many elderly relatives who chain migrate with them.

That's the ticket.

Wait. It's already reality in California.

Time for academics and leftists to go back to the imaginary worlds of their academic work.

r l love said...

Anonymous, your statement:

"Time for academics and leftists to go back to the imaginary worlds of their academic work.", suggests that the result of so many academics all competing for a limited number of academic positions would cause a state of oversupply and thereby lower salaries. This would seem though to be a perfect way for them to test out some of their theories: Barkley: "in the longer run, they bring more aggregate demand and do not damage employment." Of course he was referring to immigrants although I see no reason that academics in a state of oversupply should be any different than immigrants. So, I think your idea of sending them back to their "imaginary worlds" may have some educational side-benefits for them. Good idea.

Barkley Rosser said...

For what it is worth, there are many immigrants competing in the US academic job market, certainly in economics. I have long debated with Dean Baker on this point, who likes to point out restrictions on immigration for certain high-skilled professions, such as lawyers and accountants and physicians.

He often throws in "economists" with the list so that he can jeer about pro-free trade and pro-free immigration economists. However, I have gotten him to admit that this jibe does not apply to academic economists, or certainly not remotely to the degree that it does to the other three professions mentioned.

r l love said...


Your comment evoked a hazy memory of a cartoon or something I saw once on a comedy show perhaps. There is a group of white-collar types on a street corner clamoring to be chosen by 2 workers, possibly Hispanic, for some day-work. The workers are offering a few hours of accounting work or whatever and the 'suits' are competing to get into the back of a pick-up truck.

(the word verification 'thing' always refuses my first offering. If I forget that this always happens, as I have done a few times now, and I click on "close this window"... I lose my masterpieces. This is a loss to mankind and something should be done)

r l love said...


I stand corrected. It seems that if I complain about the word verification 'thing'... it does not refuse my first offering. Maybe it just needed someone to question its competence?