On April Fools' Day Alabama's immigration law (HB 56) mandates E-Verify for all employers. E-Verify is a federally run electronic employment verification system that checks employee identification against government records to weed unauthorized immigrants out of the workforce. E-Verify will hurt Alabaman businesses, Alabaman workers, and economic growth in that state and anywhere else it is tried. On April 1st, Alabama's politicians will be the fools.
It's not difficult to understand how E-Verify hurts businesses. Section 15 of the law imposes punishments for employers who knowingly or intentionally hire undocumented workers. For a first offense, the employer must fire all undocumented workers, sign an affidavit promising not to repeat the infraction, and have his business licenses suspended for 10 business days.
A second such violation incurs the business death penalty. You heard that right. All of the business' licenses and permits for the location where the infraction occurred are suspended forever. For a third violation, all of the business's licenses throughout the state are suspended forever. Alabama lawmakers, in trying to curb illegal immigration by shutting down businesses, are cutting their nose to spite their face.
As an expensive regulatory mandate, E-Verify ranks with the worst of them. Arizona has had mandatory E-Verify since early 2008 and its main effect has been to push unauthorized immigrants deeper in to the black market, burden businesses with an over-regulated labor market, and undermine the relationship between an employer and employee by coming between them.
According to a 2011 report by the non-partisan Public Policy Institute of California, E-Verify removed some unauthorized immigrants from the labor market but drove others into "less formal work arrangements," also known as the cash economy or greyer shades of the black market.
But that's not E-Verify's only failure. The Government Accountability Office (GAO) reports that 2.6 percent of workers are denied by E-Verify checks, even though many of them are citizens or legal immigrants caught in the regulatory net. Another audit of E-Verify conducted by the research service Westat found that about 1 percent of legal American workers-both immigrants and citizens-are often denied employment by E-Verify.
Additionally, 4.1 percent of initial E-Verify results are erroneous due to incorrect information in government databases. Workers have a 120 days to sort out these errors. The government holds reams of information about each of us, so a denied worker must file a Privacy Act request to discover which bit of information is incorrect. In 2009, a Privacy Act request took an average 104 days. Those delays will increase as more employers sign up for E-Verify.
Stories of E-Verify checks going awry abound. MCL Enterprises, which owns 24 Burger King restaurants in Arizona, reported that over 14 percent of its employees were initially deemed unauthorized by E-Verify. Ken Nagel, co-owner of two popular restaurants in Phoenix tried to hire his American-born daughter, but she flunked E-Verify. Mike Castillo, owner of PostalMax in Scottsdale, wanted to hire a part-time worker but an E-Verify glitch made the filing difficult. After taking days to fix the problem, Castillo said, "I don't think people are going to really embrace E-Verify."
E-Verify will incentivize people to flout the law. In the first year after E-Verify was mandated in Arizona, most employers ignored it. From late 2008 to late 2009, 1.3 million people were hired in Arizona but only 732,455 E-Verify checks were made.
Arizona's experience was bad enough, but Alabama farmers will be especially hard hit by E-Verify. Alabama's farming industry accounts for more than $5 billion a year, and undocumented immigrants are a major source of labor, perhaps even a majority of pickers according to some estimates. The Federal H-2A visa for low skilled workers is inadequate to supply the quantity labor demanded by Alabama's farmers.
If you think dealing with the tax man is frustrating, just try dealing with the immigration bureaucracy. A recent survey of farmers in neighboring Georgia revealed the level of impatience and disgust ordinary farmers experience while trying to apply for the small number of H-2A visas available. One frustrated farmer wrote, "I was 15-20 workers short this year. Due to laws that [a]ffected the migration of seasonal help." A plea for liberalization couldn't be clearer.
The I-9 form was mandated in 1986 to keep employers from hiring unauthorized immigrants. But instead, it has burdened American businesses and workers with an estimated 13.5 million additional hours of paperwork a year. E-Verify would add to that cost.
As Adam Smith stated in The Wealth of Nations, an open economy requires the "free circulation of labour and stock, both from employment to employment and from place to place," including across borders. Only when legal immigration barriers are removed, will the black market and red tape that characterize America's current immigration system disappear.