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Immigrant workers save aging economies but face financial struggles in their own senior years

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Immigrants support the economy of aging societies in many ways. They pay into social pension programs, which finance the lives of retirees. Many of them work in the care industry and directly serve older people, which reduces nursing home needs on a community level.

Immigrants themselves also benefit economically from moving to a new country. At every education level, they typically enter the labour market with lower wages than native-born citizens do, but eventually catch up over time.

However, my recent study has revealed that things look completely different when it’s immigrants’ own turn to retire. Using decades of follow-up data, I found that immigrants’ income falls behind once they turn 50 and their disadvantage only gets worse as they continue to age.

A disadvantage that keeps growing

I focused on men who immigrated to the United States between the 1960s and 1980s — a group that had previously been found to have achieved upward mobility in the labour force. Using data representative of older adults in the U.S., I compared these immigrant men to native-born men with similar educational backgrounds.

A line graph illustrating immigrant men's income declining after age 50
Immigrant men experience a steep decline in income relative to native-born men after age 50. (Leafia Zi Ye)

Consistent with the narrative that they made much economic progress as young workers, immigrants in my study receive 90 per cent of what their native-born counterparts receive in income at age 50.

However, after age 50, immigrants started receiving increasingly less income compared to native-born individuals. It is as if they begin experiencing a reversal of the upward trajectory they once had, undoing all the progress they had gained.

As immigrant men reach their 60s, their income relative to the native-born shrank to just over 80 per cent. This gap widened around age 65, the typical retirement age. By ages 75 to 79, the same immigrants only received 68 per cent of what their native-born counterparts did.

This pattern of “aging into disadvantage” was present whether I focused on men with low or high Education. It also held true for men across racial and ethnic groups.

Why do immigrants fall behind in retirement?

Typically, how people fare after retirement is consistent with how they fare economically throughout their working life. Why do immigrants’ income trajectories take such a surprising turn?

Part of the reason is that income sources change as people age. Before reaching 50, immigrants are able to catch up with native-born individuals through labour force income (money earned from jobs). After 50, however, people increasingly rely on passive income from pension and insurance programs. This is where immigrants fall short.

But why is passive income lower among immigrants? I found two main explanations in my study: how social pension benefits are calculated and the types of jobs immigrants end up in.

Social pension benefits are based on people’s earnings over their entire career. Immigrants have lower earnings upon arrival because it takes time to acquire the skills their host country needs.

Additionally, since part of their work experience may have been gained before immigrating, they have contributed less to old-age benefits in their host country. Although their earnings grow quickly once they have settled in, the initial disadvantage still reduces immigrants’ retirement benefits.

An older middle-aged woman with grey, shoulder-length hair presses buttons on a calculator while holding a paper bill in one hand
After 50, people increasingly rely on passive income from pension and insurance programs. (Shutterstock)

Immigrants are also more likely to be in occupations that offer poorer benefits, such as farming, taxi driving and caregiving. Even as they get raises at work, their employers may not contribute much to their retirement plans.

Both of these arguments are supported by data that shows U.S. immigrants receive particularly little when it comes to social security benefits and employer pensions. As older adults’ reliance on passive income grows, the immigrant disadvantage becomes increasingly pronounced.

The future of immigration and aging

Around the world, countries continue to use immigration to combat the economic pressures of aging. And it has worked: in Canada, the medium and average age both fell in 2023 — for the first time in decades — thanks to the country’s aggressive approach to recruiting new immigrants.

This has created an image of immigrants as young workers. But immigrants age too — and in large cities such as New York City, immigrants now make up the majority of the population over 65. In Toronto, where I live, two in three senior residents are foreign-born.

My study has shown that older immigrants’ economic struggles did not come out of nowhere; retirement financing begins the moment immigrants arrive. This process is likely taking place in other societies with similar pension systems. In Canada, a quarter of older immigrants are low income — double the rate of non-immigrants.

Programs aimed at improving immigrants’ aging outcomes, like Nova Scotia’s Immigrants Aging Well in Canada program, must intervene earlier to be effective. These programs not only affect immigrant seniors, but also the next generation, who often become their parents’ retirement plan when broader social support is unavailable.

It was public policies that brought in immigrants to support aging economies. Now, it’s time for policies to support immigrants as they age.

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