Not on the Radar: Illegal Immigrants Are Bolstering Social Security

Contributions without benefits provide a huge subsidy. Since illegally crossing Mexican border into United States six years ago, Angel Martinez has done backbreaking work, harvesting asparagus, pruning grapevines, and picking ripe fruit. More recently, he has also washed trucks, often working as much as seventy hours a week, earning $8.50 to $12.75 an hour. Not surprisingly, Mr. Martinez, 28, has not given much thought to Social security's long-term financial problems. But Mr. Martinez-who comes from state of Oaxaca in southern Mexico and hiked for two days through desert to enter United States near Tecate, some 20 miles east of Tijuana-contributes more than most Americans to solvency of nation's public retirement system. Last year, Mr. Martihez paid about $2,000 toward Social security and $450 for Medicare through payroll taxes withheld from his wages. Yet unlike most Americans, who will receive some form of a public pension in retirement and will be eligible for Medicare as soon as they turn 65, Mr. Martinez is not entitled to benefits. He belongs to a big club. As debate over Social security heats up, estimated seven million or so illegal immigrant workers in United States are now providing system with a subsidy of as much as $7 billion a year. While it has been evident for years that illegal immigrants pay a variety of taxes, extent of their contributions to Social security is striking: money added up to about 10 percent of last year's surplus-the difference between what system currently receives in payroll taxes and what it doles out in pension benefits. Moreover, money paid by illegal workers and their employers is factored into all Social security Administration's projections. Illegal immigration, Marcelo Suarez-Orozco, co-director of immigration studies at New York University, noted sardonically, could provide the fastest way to shore up long-term finances of Social security. It is impossible to know exactly how many illegal immigrant workers pay taxes. But according to specialists, most of them do. Since 1986, when Immigration Reform and Control Act set penalties for employers who knowingly hire illegal immigrants, most such workers have been forced to buy fake IDs to get a job. Currently available for about $150 on street corners in just about any immigrant neighborhood in California, a typical fake ID package includes a green card and a Social security card. It provides cover for employers, who, if asked, can plausibly assert that they believe all their workers are legal. It also means that workers must be paid by book-with payroll tax deductions. IRCA, as immigration act is known, did little to deter employers from hiring illegal immigrants or to discourage them from working. But for Social security's finances, it was a great piece of legislation. Starting in late 19805, Social security Administration received a flood of w-2 reports with incorrect-sometimes simply fictitious-Social security numbers. It stashed them in what it calls earnings suspense in hope that someday it would figure out whom they belonged to. The file has been mushrooming ever since: $189 billion worth of wages ended up recorded in suspense file over 1990s, two and a half times amount of 19805. In current decade, file is growing, on average, by more than $50 billion a year, generating $6 billion to $7 billion in Social security tax revenue and about $1.5 billion in Medicare taxes. In 2002 alone, last year with figures released by Social security Administration, nine million w-2s with incorrect Social security numbers landed in suspense file, accounting for $56 billion in earnings, or about 1.5 percent of total reported wages. Social security officials do not know what fraction of suspense file corresponds to of illegal immigrants. …