Social Security Benefits of Immigrants and U.S. Born

TitleSocial Security Benefits of Immigrants and U.S. Born
Publication TypeBook Chapter
Year of Publication2000
AuthorsGustman, AL, Steinmeier, TL
EditorBorjas, G
Book TitleIssues in the Economics of Immigration
PublisherUniversity of Chicago Press
KeywordsConsumption and Savings, Demographics, Employment and Labor Force, Pensions, Public Policy, Retirement Planning and Satisfaction, Social Security

Immigrants realize higher Social Security benefits per year worked in the U.S. then U.S. born, even when earnings are identical in all years the immigrant has been in the U.S. The benefit formula favors those with low lifetime covered earnings, and the years prior to immigration are treated as years of zero earnings. If instead earnings were averaged only over years of residence in the U.S., and benefits were prorated based on the share of a 35 or 40 year base period spent in residence, immigrants would receive the same return on their social security taxes as U.S. born. For a sample from the Health and Retirement Study, a group born between 1931 and 1941, prorating reduces immigrants' social security benefits by 7 to 15 percent. For immigrants who entered in the 1980's, the reductions would be over 30 percent. Prorating would reduce the present value of benefit payments to immigrants born from 1932 to 1941 by 7.5 billion to 15 billion. Most immigrants will still pay slightly more in taxes than they will receive in benefits. Taxes received from immigrants who subsequently emigrate without collecting benefits tip the balance in favor of including immigrants.


RDA 1996-005 ProCite field 8 : ed.

Endnote Keywords

Migration--International/Social Security and Public Pensions/Economics of the Elderly/Retirement/Retirement Policies/Immigrants/Social Security/Benefit Formulas/Taxes

Endnote ID


Endnote Author Address

NBER Working Paper 6478. Copies available from: National Bureau of Economic Research, 1050Mass achusetts Avenue, Cambridge, MA 02138.

Citation Key5156