Social Security and the Emigration of Immigrants

Article excerpt

Each year the Social Security Administration forecasts the financial status of the Old-Age, Survivors, and Disability Insurance (OASDI) programs by projecting trends in key variables such as the labor-force participation and earnings of the U. S. population. In the difficult task of projecting the long-term financial status of Social Security, assumptions are made concerning the relationship of immigrants to Social Security. An important aspect of that relationship is the emigration of immigrants.

This article describes the general assumptions related to the level and timing of emigration that underlie projections of Social Security's financial status and examines how closely these assumptions fit research findings based on a variety of data sources. Previous trends in emigration and factors that may affect current and future levels of emigration are described. The article also presents theoretical expectations and empirical evidence concerning the timing of emigration.

Over the past decade, more than a third of the Nation's population growth was due to immigration. This influx of new immigrants will have a profound effect on Social Security by affecting the size and composition of the population contributing to and benefiting from the Old-Age, Survivors, and Disability Insurance (OASDI) program. The extent to which immigration influences the Social Security system is affected by the emigration of immigrants. Emigration affects how many immigrants contribute to the system, how long immigrants contribute to the system, and whether immigrants are eventually eligible for Social Security benefits. Although reasonably good estimates of the number of legal immigrants are available on an annual basis from the Immigration and Naturalization Service (INS), little is known about emigration, other than that the vast majority of emigrants are immigrants. This lack of information led the--1991 Advisory Council on Social Security to conclude:

Because of lack of data on emigration and other-than-legal immigration, even present levels of net immigration are only educated guesses that may be far from accurate. (Social Security Administration 1991, p. 33).

This article describes the general assumptions related to emigration that underlie projections of Social Security's financial status and examines how closely these assumptions fit research findings. The first section provides a simplified overview of how immigration enters into the Social Security projections and summarizes the assumptions that are made about the magnitude and timing of emigration. The second section focuses on the magnitude of emigration, first describing previous trends in emigration and then discussing factors that may affect current and future levels of emigration. The following sections focus on the timing of emigration. The first one proposes four hypothetical models of the decision to emigrate and explores the implications of these models for the timing of emigration. The next section sheds empirical light on the timing of emigration. The article concludes with a discussion of the correspondence between research findings and the assumptions concerning the magnitude and timing of emigration that underlie projections of Social Security's financial status.

EMIGRATION AND SOCIAL SECURITY PROJECTIONS

Each year the financial status of the OASDI program is forecast by the Social Security Administration by projecting trends in key demographic and economic variables based on historical aggregate trends as well as educated guesses about the likely direction of future trends. Estimated trends in economic variables, such as labor-force participation and earnings, are imposed upon estimated trends in the size of the age-and sex-specific populations that contribute to and benefit from Social Security. Estimates of net immigration are one component of these population projections: they are derived by subtracting from the number of persons who immigrate those who emigrate. …