00:00:02
so Kent there's a lot of talk that
00:00:04
Social Security just won't be there for
00:00:06
younger people right so my question is
00:00:08
will Millennials receive the same Social
00:00:11
Security benefits as their parents under
00:00:14
current law the answer is no in fact
00:00:16
we're projecting that the trust fund
00:00:18
will be exhausted by
00:00:21
2031 just 14 years so what the law
00:00:24
actually says is that benefits across
00:00:27
the board have to be cut um in order to
00:00:30
Simply match the current payroll tax
00:00:32
revenue that they're getting at the time
00:00:34
so that's about 30% reduction and more
00:00:38
that means 2034 or so in 2031 31 yeah if
00:00:44
nothing changes then Social Security uh
00:00:47
benefits payments monthly payments would
00:00:49
have to be cut by 30% for everyone and
00:00:52
that's the key it's not just for new
00:00:54
retirees which could be a little less
00:00:56
painful but your 90-year-old grandmother
00:00:58
who's Maybe just surviving that Social
00:01:01
Security the benefits would be cut for
00:01:03
her as well okay so um so of course
00:01:06
everyone's scrambling to figure out what
00:01:08
are some things that could be done about
00:01:09
this uh one of the uh common ideas is to
00:01:13
raise the retirement age for Social
00:01:16
Security how much does that help it
00:01:19
doesn't help much for the short term in
00:01:21
particular barely moves the trust fund
00:01:24
exhaustion date um from
00:01:27
2031 um and the reason why why is that
00:01:30
under current law Social Security
00:01:32
retirement age is creeping up to age 67
00:01:36
even if you push it out to age 70 it
00:01:40
this idea that's been battered around
00:01:41
for a couple decades in Washington we
00:01:43
just kind of waited too long to do it um
00:01:45
and so it barely moves the trust fund
00:01:47
exhaustion date over the long term it's
00:01:50
actually has a a much bigger impact but
00:01:54
for the immediate term on the Social
00:01:56
Security trust fund it barely moves it
00:01:58
simply because we waited too long to do
00:01:59
it and what's the difference between the
00:02:02
immediate and the long terms in other
00:02:04
words at some point we'd be better off
00:02:06
if if not fully whole but how long would
00:02:09
would the lag time be so uh the Trust on
00:02:12
exhaust in
00:02:13
2031 um because this we would phase in
00:02:17
toward age 70 along the current path
00:02:20
which is about two months per year it
00:02:22
takes too long so um the trust fund
00:02:25
barely moves um over what's called a
00:02:27
75-year window which is how so Security
00:02:30
Act R typically look at this it helps by
00:02:33
uh improve the uh finances by almost a
00:02:36
third so it actually has a big impact
00:02:38
over time is just that it takes a long
00:02:41
time for it to phase in oh okay and the
00:02:43
other solution often put forth is well
00:02:46
how about if we increase taxes on people
00:02:48
with high incomes because there's a cap
00:02:50
right now on who on how much people pay
00:02:52
that's right in particular you pay taxes
00:02:55
up to the first
00:02:57
$118,500 that's in index with wages so
00:03:01
it it kind of grows over time and we
00:03:04
call that the tax Max and it's the
00:03:07
maximum that your uh income that your
00:03:09
taxes are are are levied over and so if
00:03:12
you increase that from
00:03:14
118,000 500 to all the way to 400,000
00:03:18
for example um it it basically moves the
00:03:21
trust fund exhaustion date from 2031 to
00:03:25
2036 and going above 400,000 has almost
00:03:28
no impact because there just not enough
00:03:30
people there in fact going from 250,000
00:03:33
to 400,000 has very little impact so
00:03:36
again it can be part of of a bigger
00:03:38
solution but by itself it's not going to
00:03:40
solve the problem what about um reducing
00:03:45
benefits for high income people who
00:03:47
presumably don't need the money as much
00:03:49
as that that 90-year-old grandmother
00:03:50
does right and that's another idea
00:03:53
that's been um discussed in Washington a
00:03:55
lot of people don't understand that that
00:03:57
the benefit formula is actually
00:03:59
extremely Progressive for poor people
00:04:02
replace 90% of their average income
00:04:04
before retirement and then then that
00:04:06
decreases quite a bit um for Middle
00:04:10
income and then higher income uh
00:04:12
households and so the idea has been
00:04:14
let's keep poor people kind of whole 90%
00:04:17
replacement rate but lower it for middle
00:04:20
class and kind of upper income
00:04:22
households yeah even the uh very um
00:04:25
aggressive uh across the board uh a
00:04:28
change um is for the trust fund by
00:04:31
itself it's it's basically too late I
00:04:34
mean it barely moves the trust fund as
00:04:36
far as the 70E fiveyear solvency it
00:04:40
again has a much bigger impact in fact
00:04:43
if you combine that with increase in the
00:04:45
retirement age we actually solve the
00:04:48
75-year problem um with those two
00:04:51
combinations however it we still would
00:04:54
have to come up with a mechanism for the
00:04:56
trust fund to somehow borrow against its
00:04:59
future
00:05:00
um to essentially be able to not just
00:05:02
hold assets but be be uh in debt for a
00:05:05
while and how many years would that have
00:05:07
to cover it would uh so that covers 75
00:05:10
years which is uh the standard
00:05:12
projection window right but you're
00:05:14
saying there there'd be this interim
00:05:16
when there would be a shortfall there
00:05:18
would be a shortfall for depending
00:05:20
exactly the policy combinations it could
00:05:23
be between 10 and 25 years okay so it
00:05:26
might might involve some borrowing
00:05:27
before things kind of off a little bit
00:05:31
uh the other item is the cost of living
00:05:35
uh allowance or raise the cola that is
00:05:38
provided each year although there wasn't
00:05:39
one last year right um based on
00:05:42
inflation uh and if that were adjusted
00:05:44
how much would that help of course in a
00:05:46
way that's cutting benefits if you cut
00:05:48
that yeah it it is and so under current
00:05:51
law what happens is that the uh Social
00:05:54
Security benefits are adjusted every
00:05:56
year for using What's called the CPI W
00:05:59
which which was just what they happen to
00:06:01
choose at the time and one of the
00:06:03
concerns that economists have had is
00:06:06
that that index doesn't uh account for
00:06:09
what's called
00:06:11
substitution um where you you might have
00:06:15
a product price that goes up on you and
00:06:17
you substitute toward lower prices we're
00:06:20
seeing this with for for example with
00:06:21
the Affordable Care Act as a lot of
00:06:23
plans go more expensive people
00:06:25
substitute toward cheaper plans and so a
00:06:28
true measure of inflation would allow
00:06:29
for that substitution that's called The
00:06:31
Chain wited index that's been something
00:06:34
that's been discussed a lot ever since
00:06:36
the bosin commission and other groups um
00:06:39
it actually turns out it doesn't have
00:06:40
that big of an impact um even though the
00:06:43
long term it has a positive impact on
00:06:45
the trust fund not that big and another
00:06:48
concern that sometimes people raise is
00:06:50
that it's not even clear even the chain
00:06:52
weighted is actually the right measure
00:06:54
for older people in particular older
00:06:57
people have a lot of out of-pocket
00:06:59
Medical expenses that is not
00:07:02
representative of the average person in
00:07:04
the economy that the that the chain
00:07:06
weighted cares about or even the CPI the
00:07:08
current law so that that will be
00:07:11
something that there's a lot going to be
00:07:12
a lot of discussion about in terms of
00:07:14
the numbers it doesn't really have a big
00:07:16
impact um if Americans together paid
00:07:20
more taxes uh would that save Social
00:07:24
Security as we know it sure I mean if
00:07:26
you increase taxes or cut benefits you
00:07:28
know you're going to solve the problem
00:07:30
and so if we just uh right now if we
00:07:33
think about the tax side right now we
00:07:35
currently Levy uh a a payroll tax rate
00:07:38
of about
00:07:39
12.4% for Social Security and also the
00:07:42
disability program and then an
00:07:44
additional tax to cover Medicare so if
00:07:47
we increase at
00:07:48
12.4% to say
00:07:51
14.4% um and that's 2% uh points but as
00:07:55
a percent you know that's that's shared
00:07:57
by the employer and the employee it's
00:07:58
shared by the uh by both sides now truth
00:08:02
be told most economists believe that
00:08:03
ultimately the employees bear the the
00:08:06
the brunt of even the employer side that
00:08:08
the incidents get shifted through
00:08:10
competitive labor markets um if we did
00:08:13
that if we went from 12.4 to 14.4 we
00:08:16
would um increase the life of the trust
00:08:18
rund from about 2031 under our
00:08:20
projections to about
00:08:21
2043 you would have to actually go all
00:08:23
the way up to about
00:08:25
16.4% to actually have the trust fund U
00:08:29
be solvent until about
00:08:31
2085 um and even then eventually it's
00:08:34
going to uh it will go negative because
00:08:36
benefits continue to rise but if you if
00:08:39
you took some of the other measures you
00:08:40
were talking about earlier and then also
00:08:42
did this for the inter to say get over
00:08:45
the hump yeah sounds like that might
00:08:47
work yes yeah there there our policy
00:08:50
simulator allows for
00:08:52
4,096 combinations and so lots of
00:08:55
different combinations that people can
00:08:57
try and they get instant feedback on
00:08:59
that it's from a very sophisticated
00:09:01
model but we've used advances of cloud
00:09:04
computing to pre-calculate everything
00:09:06
for you so you get instant feedback so
00:09:08
there's lots of combinations even ones I
00:09:11
haven't had time to explore yet that
00:09:12
could potentially uh uh work here well
00:09:15
we'll get to the model that you're
00:09:17
talking about that you help develop soon
00:09:18
or soon we'll get to it U and as a
00:09:21
matter of fact that's going to be
00:09:23
something that anyone can go on the web
00:09:25
and use is that right everybody can use
00:09:27
it polic policy ERS we're hope um we've
00:09:31
had a lot of conversations with them
00:09:32
they're excited about they want access
00:09:34
to tools that they can use while they're
00:09:36
actually writing legislation but the
00:09:39
average person can use it and um we've
00:09:42
been uh showing it to various professors
00:09:44
around the country and they want to use
00:09:46
it for their classroom just to give
00:09:48
students tools that they can start to
00:09:50
see these tradeoffs so an interesting
00:09:51
new tool yeah so K the whole idea of
00:09:55
immigration I guess illegal immigration
00:09:59
and documented workers has been a big
00:10:01
part of this presidential primary
00:10:03
process and now the presidential race so
00:10:06
uh I guess The $64,000 Question is uh
00:10:10
will providing a path to to legalization
00:10:13
for
00:10:15
unauthorized workers immigrants uh in
00:10:18
the US will that improve the economy or
00:10:21
does it hurt the economy by hurting uh
00:10:24
some lower wage workers yeah and it
00:10:26
turns out and this is one of the
00:10:28
surprises that uh we found and this is
00:10:31
really one of the advantages of having
00:10:33
this really detailed model is that the
00:10:35
impact on economy from legalization is
00:10:38
is basically a wash and here's what's
00:10:42
going on when it comes to jobs
00:10:45
legalization actually slightly reduces
00:10:48
the number of jobs and the and what's
00:10:52
number of people working and the reason
00:10:54
why is that when you're illegal you
00:10:57
pretty much have to be working because
00:10:59
you're not you don't have access to
00:11:01
unemployment insurance you don't have
00:11:03
access to going to schooling like
00:11:05
college and things like that we probably
00:11:07
came here to work to begin with you came
00:11:08
here to work and you pretty much have to
00:11:11
work to eat um once we have
00:11:14
legalization and we're able to track at
00:11:16
the census level data the differences
00:11:18
between uh undocumented and legal uh
00:11:21
what we see is legal immigrants have a
00:11:24
slow a little bit of a lower um labor
00:11:27
force attachment rate and the reason why
00:11:30
is because um they can uh uh spend more
00:11:33
time looking for appropriate work they
00:11:35
qualify unemployment insurance and they
00:11:37
also can get a college degree and up
00:11:39
their skills and so that that's the
00:11:42
reason why they effect on GDP is
00:11:44
basically a wash in particular less um
00:11:47
employment but more at more skills and
00:11:50
it's it has almost no impact so the
00:11:53
implication is that
00:11:54
deporting uh illegal immigrant workers
00:11:57
isn't going to help the economy
00:12:00
uh yeah in fact um some people on the
00:12:03
other side say well deportation should
00:12:06
be good for the economy that turns out
00:12:07
not to be true either um in fact uh we
00:12:11
we F calculate that deportation actually
00:12:14
will substantially lower GDP and lower
00:12:18
jobs and the intuition behind that is
00:12:21
that native workers native born workers
00:12:25
their labor force participation rate
00:12:27
cannot possibly increase in enough to
00:12:30
offset the loss of jobs and so the
00:12:33
impact on GDP is actually uh fairly
00:12:37
negative uh another question is can
00:12:41
increasing the proportion of authorized
00:12:44
immigrants uh with college degrees can
00:12:46
that help our economy so where a lot of
00:12:49
kids come here they get their degrees
00:12:51
from other countries and um and they're
00:12:53
not able to stay right and it's really
00:12:56
critical as you just noted the The Sting
00:12:59
between these are legal immigrants as
00:13:01
opposed to illegal immigrants we have
00:13:04
about 800,000 legal immigrants per year
00:13:07
about 35% of them have a college degree
00:13:10
so a lot of the proposals have been
00:13:12
let's keep the 800,000 the same number
00:13:15
but shift that 35% upward maybe make it
00:13:18
half 55% and so forth to our surprise
00:13:22
and then this the value of having these
00:13:24
detailed models it actually has a
00:13:26
positive impact by increasing the amount
00:13:29
of college educated uh immigrants it has
00:13:31
a positive impact but it's not that big
00:13:35
and um and as you dig into the numbers
00:13:38
what uh what you see is that first
00:13:40
immigration itself as a legal
00:13:43
immigration as a total is only about 1%
00:13:46
of the US population and then when you
00:13:49
go from 35% to 55% you're actually
00:13:52
increasing the college educated
00:13:54
Workforce in the United States by only
00:13:57
about half of 1% so the impact again is
00:14:00
positive but it's not a huge impact
00:14:03
instead what you ultimately need to do
00:14:05
is increase not just the uh the kind of
00:14:08
the shift you don't just just change in
00:14:10
the composition but actually increaseing
00:14:12
in the number the the number of h-1bs
00:14:15
without uh uh a change in the number of
00:14:18
unskilled uh immigrants that that
00:14:21
actually has a much bigger impact what
00:14:23
about lifting the total number of
00:14:25
immigrants yeah and so uh above 800,000
00:14:29
yeah um so increasing more immigrants
00:14:32
basically means more jobs and more uh
00:14:36
GDP um in fact what we find that if we
00:14:39
actually increase legal immigration from
00:14:42
800,000 uh by an additional 400,000 by
00:14:45
roughly 50% um and by 2050 we'll have a
00:14:49
GDP that's about 15% larger than what we
00:14:52
see today what is that
00:14:55
annually do you happen to know I'm just
00:14:57
curious like how much would GDP go up
00:14:59
per year if you if you increase by that
00:15:00
number well it's over a trillion dollars
00:15:03
um and so we're we're talking about a
00:15:05
pretty significant uh and so in current
00:15:08
dollars um I would have to do the
00:15:10
exactly well that I'm sure yeah um what
00:15:15
what effect would an increase uh in
00:15:17
Immigration have on Social Security and
00:15:20
say Medicare yeah um and that it used to
00:15:22
be a very controversial issue there's
00:15:24
those always this concern that
00:15:25
immigrants are coming in right before
00:15:27
they qualify for Social Security and and
00:15:29
Medicare and that a lot of that debate
00:15:32
is uh was not correct and a lot of
00:15:35
changes have been made in the laws in
00:15:36
the mean time um nowadays U increased
00:15:40
immigration is actually a slight
00:15:42
Improvement for Social Security and
00:15:45
Medicare and the reason why is
00:15:46
immigrants are coming in during their
00:15:49
working years typically younger and as
00:15:53
result that that the What's called the
00:15:54
old age dependency ratio is improved and
00:15:57
in particular we have more young people
00:16:00
relative to old people and that helps
00:16:03
improve uh the finances it's not it's
00:16:05
not huge um but nonetheless it is
00:16:08
positive so we've talked about this
00:16:10
model that you've helped to develop why
00:16:12
don't we go take a look at how it works
00:16:15
great hi I'm Kent Smothers a professor
00:16:18
here at the Wharton School and I'm going
00:16:19
to give you a quick overview of the new
00:16:23
social security policy simulator that's
00:16:25
available at the pen Wharton budget
00:16:28
model group and you can see from the uh
00:16:32
screen here is that you have a choice of
00:16:35
various graphs that you can be looking
00:16:37
at things like trust fund reserves
00:16:39
non-interest Surplus which is the
00:16:41
difference between uh benefits paid and
00:16:44
tax income receive uh Social Security
00:16:46
taxes benefits uh interest income lots
00:16:50
of other varieties and we also compare
00:16:53
our results against those from the
00:16:55
Social Security Administration and the
00:16:58
Congressional budget office and first
00:17:00
off before we do even think about any
00:17:03
policy changes you can see that our
00:17:05
model projects that we will um uh
00:17:11
exhaust the trust fun exhaustion date
00:17:13
will be about three and a half to four
00:17:15
years earlier than the Social Security
00:17:18
um trustees uh project in particular we
00:17:22
uh uh see
00:17:23
a deficits happening around
00:17:27
2031 and uh come 2031 we're we're seeing
00:17:32
um projecting that we'll actually have a
00:17:35
non-interest surplus of about
00:17:38
$350 billion in today's dollars
00:17:41
eventually growing to um over 1.2
00:17:44
trillion dollars per every single year
00:17:48
again in today's uh uh dollars and our
00:17:51
75e shortfall is about a third larger
00:17:55
than what you see from the Social
00:17:57
Security Administration and the
00:17:59
understand why you can look at the uh
00:18:01
Social Security tax revenue and we have
00:18:04
a more pessimistic projection of tax
00:18:06
revenue coming in over time and the
00:18:08
reason uh behind that is that um our
00:18:12
model starts with census level data and
00:18:14
we construct these uh transition rules
00:18:17
based on various big data sets across
00:18:19
many different key attributes age uh
00:18:22
race marriage divorce number of kids
00:18:25
education and many other attributes
00:18:27
across law population subgroups so we're
00:18:30
really working kind of bottom up and as
00:18:32
a result of that we can see how
00:18:34
productivity in the economy is changing
00:18:37
as you have these large labor force um
00:18:39
composition changes as people uh are
00:18:42
going into retirement um they're being
00:18:45
replaced by younger people and average
00:18:47
productivity per worker for example goes
00:18:49
down as a result of that our benefits
00:18:51
also go down um a little bit relative to
00:18:54
Social Security um but there um our tax
00:18:58
revenue is is uh is the main uh
00:19:01
difference and our numbers line up a
00:19:03
little bit closer to uh the cbo's own
00:19:07
model on this all right so now let's
00:19:09
consider some different policy changes
00:19:11
and we have six options to pick from
00:19:13
here um increase in the payroll tax uh
00:19:16
increase in taxable maximum and lots of
00:19:19
other options there's uh alt together
00:19:21
there's uh six options each has uh uh
00:19:25
four different combinations associated
00:19:27
with it so there's actually 4 to the six
00:19:29
power different combinations 4,096
00:19:32
policy combinations that you can run now
00:19:35
our model you know it each one takes
00:19:37
about 30 minutes to an hour to run so
00:19:40
you might be wondering how you're
00:19:41
getting instant feedback as as as you
00:19:43
move things around in different policy
00:19:45
changes and we the reason is we're using
00:19:48
cloud computing to do all the
00:19:49
computations ahead of time and so that
00:19:52
gives you um instant feedback let's
00:19:54
consider a couple policy changes that uh
00:19:56
uh policy makers for years have been
00:19:58
kind of talking about let's for example
00:20:01
talk about raising the normal retirement
00:20:03
age this one down here and we have a
00:20:05
little tool tip here with it basically
00:20:07
says um what the current law is uh in
00:20:11
particular the retirement age is going
00:20:12
up to age 67 uh roughly about two months
00:20:16
per year and if you want more info it
00:20:18
can give you even more expanded info
00:20:20
information and so this would be a
00:20:22
policy change to continue that increase
00:20:24
if you wanted to do that say even to age
00:20:26
70 and now when we do that you'll notice
00:20:31
here that the um impact on the trust
00:20:34
fund exhaustion date from increasing
00:20:37
their retirement age is basically less
00:20:39
than one year it's it's a very small um
00:20:42
uh change and by the way if you wanted
00:20:44
to you could even kind of zoom in on a
00:20:46
particular years and kind of get get
00:20:48
more information you can you can
00:20:50
actually uh uh look at particular years
00:20:53
the values and so forth and it doesn't
00:20:55
have a big impact however um over time
00:20:59
uh increase in retirement age does have
00:21:01
a much bigger impact on the non-interest
00:21:04
Surplus um the big deficit uh over time
00:21:07
goes down um and and what's going on
00:21:11
here is essentially increasing the
00:21:14
retirement age is uh is simply basically
00:21:17
too late to solve the problem at least
00:21:20
for the trust fund it can be part of a
00:21:22
longer term solution um but it just
00:21:25
simply phases in uh too slowly over uh a
00:21:29
time and then we have some other uh uh
00:21:32
things that you can consider here one is
00:21:34
a progressive benefit reduction um and
00:21:39
uh here it it explains the tool tip
00:21:41
explains how benefits are currently
00:21:43
calculated in particular the government
00:21:46
um you uh currently uh calculates your
00:21:49
benefits uh equal to 90% replacement
00:21:53
rate up to a certain value called a
00:21:55
bendo then 32% and then
00:21:59
15% um and so this is a policy where you
00:22:02
you keep the 90% replacement rate for
00:22:04
poor households constant but you
00:22:07
decrease the replacement rate on richer
00:22:08
households and you can see the impact on
00:22:12
the trust fund is actually also uh
00:22:15
fairly small um and the current policies
00:22:19
are blue line the red policies kind of
00:22:21
the new line and it it barely kind of
00:22:23
moves uh the trust fund uh
00:22:27
exhausting date
00:22:29
and and the intuition behind that is
00:22:32
again um it just it's a bit too late to
00:22:35
have an impact on on things it phases in
00:22:38
too slowly however again over time it
00:22:41
has a much bigger impact and then you
00:22:43
can start to do interactions like you
00:22:45
know suppose I want to do a progressive
00:22:48
benefit reduction increase the normal
00:22:49
retirement age and you can now start to
00:22:52
see that has a much bigger impact over
00:22:54
time in terms of the trust fund reserves
00:22:56
themselves again not a huge um impact at
00:23:01
least in the the short run okay so now
00:23:05
let's consider you know other things I
00:23:07
mean you can um a lot of people have
00:23:09
argued for like increase in the taxable
00:23:11
maximum right now your uh payroll is
00:23:14
being taxed up to
00:23:17
$118,000 um 500 per year at at a 12.4%
00:23:21
tax rate and so some people have argued
00:23:23
that maybe we should Levy that tax over
00:23:26
a larger um income base and what we can
00:23:29
see is for example as we go to um uh uh
00:23:33
the say increase the
00:23:36
$250,000 it actually has an impact on on
00:23:40
the trust fund as we go to 400,000 has a
00:23:42
slightly bigger impact not much of a
00:23:44
difference um going from 250 to 400,000
00:23:47
households there's just not enough
00:23:48
households there and as you go above
00:23:50
400,000 house uh dollars it it has
00:23:54
almost no impact going forward but again
00:23:57
um uh we get some like life but you know
00:23:59
over the long term it it starts to you
00:24:01
know get a little bit bigger this is one
00:24:03
of those policies that has a a much
00:24:05
bigger impact in the short run because
00:24:07
it's immediately happening then um but
00:24:10
relative to the long term and so you can
00:24:12
now start to think about different
00:24:14
combinations I mean it's a 4,096
00:24:17
combinations uh here to for you to
00:24:19
explore I I haven't even explored every
00:24:21
single combination and so you can um see
00:24:25
the tradeoffs yourself especially
00:24:26
between the long run and the short run
00:24:28
by giving your own combinations a try
00:24:32
thank you now I'm going to give you a
00:24:35
quick overview of the new immigration uh
00:24:38
reform policy simulator that's available
00:24:40
at the pen Wharton budget model group
00:24:43
notice that you have uh several
00:24:45
different graphs that you can look at
00:24:47
things like total population size and uh
00:24:49
number of jobs the old age dependency
00:24:52
ratio that's very useful for things like
00:24:55
understanding how many young people that
00:24:57
we have
00:24:58
uh uh per older retiree and then of
00:25:02
course gross domestic product GDP that
00:25:04
people often care about so now let's
00:25:07
consider different policy combinations
00:25:09
each one dial control here um is has
00:25:12
five selections and we have three uh
00:25:15
policies Al together so that's 125
00:25:17
different policy combinations that you
00:25:19
can um uh get and and see yourself for
00:25:23
each policy combination you know the the
00:25:26
actual simulation model takes several
00:25:28
hour hours to run in the case of
00:25:29
immigration but we use advances and
00:25:31
cloud computing to give you instant
00:25:33
feedback on the results um because we've
00:25:36
pre-computed everything for you all
00:25:38
right let's go through the different
00:25:39
policies um let's think about increasing
00:25:42
the net amount of legal immigration
00:25:45
right now from this tool tip you can see
00:25:47
that uh net legal immigration to the
00:25:49
United States currently amounts about
00:25:50
800,000 people per year and uh some of
00:25:55
the policy ideas out there is to maybe
00:25:57
increase that maybe 25% a year and not
00:26:00
so so surprisingly population goes up
00:26:03
total number of jobs are going to go up
00:26:06
and um GDP um is also improved because
00:26:10
of more um workers in the economy and
00:26:13
the old age dependency ratio is slightly
00:26:15
improved as well in particular we're
00:26:17
going to have a fewer older people per
00:26:20
worker because immigrants are coming in
00:26:22
typically during working age and we are
00:26:25
able to track that fairly precisely Us
00:26:28
in census level data all right let's
00:26:30
talk about some other um uh potential
00:26:33
changes here and the first one is or the
00:26:36
second one sorry is is is changing now
00:26:39
the composition of the net legal
00:26:42
immigration right now as you can see
00:26:44
from this tool tip about 305% of the US
00:26:47
adult legal immigrants have a bachelor's
00:26:50
or Advanced degree so the idea here is
00:26:52
that we can now increase that percentage
00:26:55
without actually imp uh changing the
00:26:59
800,000 uh number of legal immigration
00:27:02
immigrants per year and so we can look
00:27:05
at a couple things like you know what
00:27:07
happens to um uh GDP here suppose we go
00:27:11
from 35% to 55% and notice it's a slight
00:27:16
positive it's not huge and it's true
00:27:18
that this the values here are in
00:27:20
trillions of dollars but you can move
00:27:22
your mouse over and see the the actual
00:27:25
numbers or if you want to you can always
00:27:27
zoom in on the particular set of years
00:27:29
and get even more Precision there if you
00:27:32
if you'd like and in particular the blue
00:27:34
line is the current policy the red line
00:27:36
is the effects of the new policy and the
00:27:39
reason why it's it's not a big impact um
00:27:43
is that uh legal imig immigration flow
00:27:46
at 800,000 per year um is uh not that
00:27:51
large of a fraction of the US uh
00:27:53
population Workforce and so going from
00:27:55
35% to 55%
00:27:58
uh uh of being college educated is only
00:28:01
going to add around 160,000 college
00:28:03
graduates per year and that's only about
00:28:05
1 half of 1% of all college educated
00:28:07
worker workers in the economy and so it
00:28:10
doesn't have a tremendously large impact
00:28:13
all right now let's look at a couple
00:28:15
other policies um and the one is to
00:28:20
potentially increase deportation of a
00:28:23
unauthorized immigrant so now we're
00:28:25
really shifting from legal status to
00:28:27
unauthorized uh immigrants and the other
00:28:29
one is to offer legal status just the
00:28:31
opposite um to unauthorized immigrants
00:28:33
we can see from the tool tip that
00:28:35
there's about 11.3 million unauthorized
00:28:38
immigrants in the United States and so
00:28:40
if you uh choose to go say this
00:28:43
direction of legalization this is saying
00:28:46
we're going to be legalizing roughly
00:28:48
around 10% per year so within a decade
00:28:51
we'll have uh legalized um everyone and
00:28:54
so let's look at the impact on jobs and
00:28:57
this may be really surprising to a lot
00:28:59
of people as we legalize and notice um
00:29:03
jobs actually slightly go down it's not
00:29:05
a huge change but it does it's actually
00:29:07
legalization actually leads to fewer um
00:29:10
uh jobs again not a big change but it is
00:29:13
technically negative and the intuition
00:29:15
there is that if you're currently
00:29:18
unauthorized you pretty much have to
00:29:20
work and um in order to survive and so
00:29:23
unauthorized workers actually have a
00:29:26
higher labor force attachment M rate or
00:29:28
participation rate than those that are
00:29:31
authorized authorized workers are able
00:29:33
to now go to school and therefore not be
00:29:35
in the workforce for a period they're
00:29:37
able to look for a better job a more
00:29:40
appropriate job because they can qualify
00:29:42
for unemployment insurance things like
00:29:44
that and so that tends to reduce jobs
00:29:46
the impact on GDP is basically a wash
00:29:49
there's no particular theoretical reason
00:29:50
this should be the case but in terms of
00:29:51
the our rather detailed calculations
00:29:54
it's it's basically a wash and and it
00:29:56
has almost no impact on G GP and the
00:29:58
intuition there is that even though the
00:30:00
number of jobs has gone down a little
00:30:02
bit um the once you are converted to
00:30:06
legal status again you're able to go to
00:30:08
school you're able to get more
00:30:09
productivity and so as a result of that
00:30:12
uh the impact on GDP is is uh next to
00:30:15
nothing now let's think about what
00:30:17
happens when we go the opposite
00:30:19
direction where we start deporting it
00:30:21
say 10% per year within a decade
00:30:24
everybody would be all all the
00:30:25
unauthorized illegal immigrants would be
00:30:28
reported now notice the impact on
00:30:29
employment is now much more negative and
00:30:32
the the reason behind that is that we're
00:30:36
losing um people it's like 100%
00:30:39
Detachment now for the workforce for
00:30:41
unauthorized immigrants um and the the
00:30:45
native born um participation rate in the
00:30:48
labor market cannot possibly rise enough
00:30:50
to um uh uh meet that that Gap that that
00:30:55
reduction in the number of jobs and GDP
00:30:57
um also goes down uh uh pretty
00:31:00
substantially you can see um by uh
00:31:03
Within by
00:31:05
2035 um close to a trillion dollars um
00:31:08
reduction in GDP and so you know both of
00:31:11
these policies have been kind of
00:31:13
advocated on both SIDS of saying that
00:31:15
they're going to increase the the number
00:31:17
of jobs or increase GDP in fact neither
00:31:20
policy um uh works in the way that it's
00:31:25
it's often been presented and so you can
00:31:27
try try many other combinations yourself
00:31:30
again you have uh about 125 different
00:31:33
combinations to choose from and again
00:31:36
many combinations I've even explored
00:31:38
myself so try try it yourself and uh
00:31:41
make up your own mind thank you
00:31:55
[Music]
