President Obama’s recently leaked immigration bill left off the most important component of an immigration bill: the immigration part. Given the fact that the Chamber of Commerce and the big unions — the AFL-CIO and the SEIU — were still locked in vain negotiations over a potential guest work program, the president clearly did not want to leak a version that would step on the toes of his two biggest backers. Unfortunately, without a robust work visa system, the White House bill will be a disaster.
The bill contains 95 pages on “worksite enforcement,” that is, conscripting employers to police their workforce for unauthorized immigrants. Under the scheme proposed by President Obama, within four years, all employers with five or more employees would have to enroll into E-Verify, an internet based, national identification system. This provision would require employers would force employers to check employee Form I-9 information against an internet database that contains every American worker. Employers who fail to do so can face 10 year prison sentences and large civil fines.
Here’s the catch: employers would still have to hire, train, and pay employees who are found not to be in the database for the three weeks after the employer notifies them of the mismatch. During this period of time they have the right to contest the “further action notice” to update any missing information at Social Security Administration offices. At current error rates of a third of a percent, 171,000 authorized workers would receive “further action notices,” costing them $250 per error in lost wages and other expenses — almost a half a billion dollars to resolve over the next decade.
But the real problem for employers will be if the illegal immigration problem returns. Employers would be forced to hire, train, and pay unauthorized workers for four to six weeks, depending on the length of the appeal. This means that the employer could lose the worker with no warning in the middle of a job and have to find a new one immediately.
Both industries and academics have studied the cost of workplace turnover and concluded that hiring replacement low wage workers cost employers thousands of dollars per worker. In fact, economist Heather Boushey and colleagues surveyed “the 11 most relevant research papers on the topic” and found that replacing workers that make $30,000 per year or less costs 16 percent of the employees’ annual salary. The Sasha Corporation, a management consulting firm, averaged the results of 15 studies, mostly from industries to conclude the average cost of a worker making $8 per hour at $9,444.
If illegal immigration becomes as large of a problem as it is today (5 percent of the workforce), that would mean that employers would be forced to hire, train, pay, and ultimately fire unauthorized workers at a cost of almost $27 billion per year. Even at the current E-Verify rejection rate for voluntary users of 1.09 percent, employers under a national mandate would shell out $6.14 billion in replacement costs.
All this leads to my opening point that without a robust work visa system, the White House bill is a disaster. Only a legal immigration process that matches foreign workers with employers will eliminate illegal immigration, and only if illegal immigration is eliminated will the pending E-Verify disaster be avoided. America needs to return to a system that permits foreign workers to enter and work in a timely, inexpensive manner or Obama’s “worksite enforcement” will dump billions in new regulatory costs on American employers.