America is a nation of immigrants. Nearly every person you meet in the US is either an immigrant or descended from immigrants. In 2008 more than one million of our legal immigrants became US citizens – a record number. Indeed, in our total population of at least 310 million people, an estimated 40 million – about 13 per cent – are immigrants. An estimated 12 million of this number are illegal. These are big numbers, so how does this affect ‘legal’ US citizens?
Well for starters, even though immigrants make up 13 per cent of our population, they account for almost 16 per cent of the nation’s workforce. So they’re taking jobs away from American citizens, right? Wrong! The numbers are skewed because US citizens are aging. The truth of the matter is that immigrants, whether legal or illegal, are responsible for 58 per cent of America’s population growth over the past 30 years.
Moreover, with the low fertility rates among US citizens, the only likely source of growth in America’s ‘prime age’ workforce of 25–55-year-olds for the foreseeable future is immigration. Legal or illegal, the fact is: we need them!
We need them mostly because we need workers to pay taxes to pay for the Social Security benefits record numbers of retiring baby boomers will soon be drawing. If you are already retired, you need them because without their taxes, your benefits will be cut!
If you’re under the illusion that all of those deductions from your paycheques were being deposited in a government bank account that you’ll draw down after you retire, think again. That money has already been used to pay benefits in return for a government bond, a glorified IOU. Social welfare systems in the US and Europe were all designed this way. The money they take in each year is then paid out to current pensioners based on the assumption that as the population grows, the size of the tax-paying workforce will grow with it.
So what happens when the working-age population doesn’t grow? In this case the government faces some hard choices. The first choice I call the Greek Choice: the government borrows the money it needs by selling bonds with a promise to pay the money back later, but at a higher rate of interest because it has a poor record of balancing its books. The government assumes that it will be able to afford this costly option thanks to some future surplus of tax revenues, generated by raising retirement ages to decrease the amount it pays out in benefits, or increasing workforce taxes, or some combination of the two.
The second choice I call the German Choice: here the government also borrows the money by issuing bonds, but assumes it will be able to afford a less costly interest rate option because it has a good record of balancing its books. The smaller surplus it therefore needs is generated by raising the retirement age.
The third choice I call the American Choice: like with the others, the government borrows the money by issuing bonds, promising to pay back the money later with lower interest. The smaller surplus of tax revenues it needs to balance the books is generated by raising the retirement age, and by increasing the size of its tax-paying workforce by adding more immigrants.
Trust me: all developed countries need more immigrants, because there are other assumptions the world’s pension systems are based on. When these guesses are also off the mark, the problem of financing pensions doesn’t get better – it gets much worse.
Charles Laffiteau is a US Republican from Dallas, Texas who is pursuing a PhD in International Relations and lectures on Contemporary US Business & Society at DCU
