Center on the Economics and Demography of Aging

The foreign-born share of the U.S. population has been gradually rising in recent decades and is approaching its historic maximum. Areas that have not traditionally received immigrants have experienced greater increases in the foreign-born share than have other areas with persistently high levels of immigration. This raises clear questions about the macroeconomic impacts of immigration on native workers. Economic theory suggests that immigration shifts out labor supply, reducing wages for natives in the short run because labor demand is downward sloping, and raising unemployment among natives if wages do not fall. Although theoretically sound and widely cited in the U.S. immigration debate, this static view has received mixed support in the scientific literature. Researchers continue to debate whether influxes of immigrants like the Mariel Boatlift of 1980 reduced wages or employment among native workers in Miami, with a body of empirical evidence that often appears ambiguous.

We contribute to this debate by comparing recent trends in the employment rates of native workers in immigrant-receiving geographical areas to recent trends in other areas. We utilize the rich geographic resolution offered by the annual U.S. American Community Survey, which samples roughly 1 percent of the entire U.S. population and allows us to examine trends in public data within areas as small as 80,000 residents. The time period covered by the ACS, 2005-2016, provides us a unique look at employment outcomes during a period of much economic turbulence and differential immigration patterns across states and regions.

In contrast to the implication of the static model, we find that rising foreign-born shares of thelocal labor force are robustly associated with increases in native employment rates over 2005-2016. Our model predicts each percentage-point increase in the foreign-born share isassociated with an increase in the native employment rate of 0.075 percentage point. Because the variation in the foreign-born share is large (SD = 0.15) relative to the variation in the native employment rate (SD = 0.04), our model implies that up to one quarter of the cross-sectional variation in native employment could be accounted for by variation in the foreign-born share ofthe labor force. By contrast, average annual changes in native employment and the foreign-born share are both about 0.1 percent, implying that a much smaller share of the typical annual change in native employment, only about 5 to 7 percent, might be attributable to changes inthe foreign-born share of the labor force.

These results suggest that during the first two decades of the 21st century, the presence of foreign-born workers was not detrimental to the employment prospects of native workers and may have been a net benefit. Whether immigrant labor actually raises the employment of natives on its own or is a marker of third factors that are causal is less clear and remains the subject of future investigations.

We present stochastic forecasts of the Social Security trust fund by modeling key demographic and economic variables as historical time series, and using the fitted models to generate computer simulations of future fund performance. We evaluate several plans for achieving long-term solvency by raising the normal retirement age (NRA), increasing taxes, or investing some portion of the fund in the stock market.

Stochastic population trajectories by age and sex are generated using the Lee-Carter and Lee- Tuljapurkar mortality and fertility models. Interest rates, wage growth and equities returns are modeled as vector autoregressive processes. With the exception of mortality, central tendencies are constrained to the Intermediate assumptions of the 2002 Trustees Report. Combining population forecasts with forecasted per-capita tax and benefit profiles by age and sex, we obtain inflows to and outflows from the fund over time, resulting in stochastic fund trajectories and distributions.

Under current legislation, we estimate the chance of insolvency by 2038 to be 50%, although the expected fund balance stays positive until 2041. An immediate 2% increase in the payroll tax rate from 12.4% to 14.4% sustains a positive expected fund balance until 2078, with a 50% chance of solvency through 2064. Investing 60% of the fund in the S&P 500 by 2015 keeps the expected fund balance positive until 2060, with a 50% chance of solvency through 2042. An increase in the NRA to age 69 by 2024 keeps the expected fund balance positive until 2047, with a 50% chance of solvency through 2041. A combination of raising the payroll tax to 13.4%, increasing the NRA to 69 by 2024, and investing 25% of the fund in equities by 2015 keeps the expected fund balance positive past 2101 with a 50% chance of solvency through 2077.