Democratic leaders working with Trump to protect DACA recipients may be unwilling to fund a border wall, but they seem open to concessions on E-Verify — a system for checking on work authorization. However, universal E-Verify would only drive undocumented workers into the underground economy, costing billions of dollars in tax revenue and mostly benefiting big businesses that use subcontractors.
E-Verify is back on the political agenda.
For years, politicians have wanted to force all of the country’s 7.7 million private employers to check new hires against this online system — which compares employees’ documents with government databases in order to catch immigrants without work authorization — but so far, the efforts to impose a universal E-Verify requirement have failed. Now the idea has been given new life by a tentative agreement that President Trump and Democratic leaders made on September 13 to promote legislation protecting the immigrants previously covered by President Obama’s Deferred Action for Childhood Arrivals (DACA).
An E-Verify requirement for all employers is part of the list of immigration “principles” the White House issued on October 8; policies that Republican legislators might demand in exchange for helping DACA recipients. Meanwhile, anti-immigrant organizations and Republican senators have been calling for a new E-Verify push. The National Review announced that making E-Verify mandatory “should be non-negotiable.”
Democratic leaders say their agreement with Trump excluded any funding for the president’s promised border wall, but they may be more open to concessions on E-Verify. Liberal commentators have written favorably about the program in the past, from the New York Times editorial board to Mother Jones columnist Kevin Drum, and even Bernie Sanders seemed to accept some form of E-Verify in his 2016 election campaign platform. But E-Verify isn’t really any better than Trump’s “big beautiful wall.”
How Much, and Why?
In 2013 the House Judiciary Committee ordered the Congressional Budget Office (CBO) to report on the potential effect that a proposed E-Verify requirement would have on the federal budget. The CBO responded with an estimate that over a 10-year period the legislation would increase the federal deficit by about $30 billion — the agency expected some types of government revenue to go up by $58 billion and others to decline by $88 billion.
What would we get in exchange for this $30 billion increase in the deficit?
The theory underlying E-Verify is that undocumented immigrants come to the United States largely to find jobs. If we keep them from getting jobs, E-Verify’s promoters claim, the immigrants will stop coming, and many of those living here will go home. In September, the Federal Reserve Bank of Dallas published a study testing this theory. The authors, economists Pia M. Orrenius and Madeline Zavodny, analyzed changes in the undocumented populations and workforces in seven states that currently require all or most private employers to use the system. They found that the number of undocumented immigrants in four of the states was significantly less than what would be expected based on demographic trends; two other states showed no “statistically discernable” difference, and the seventh state had less than the expected number of unauthorized workers, but no major change in the overall undocumented population.
So E-Verify appears to have been successful in some states but not in others. Moreover, this partial success doesn’t tell us how effective E-Verify would be on the national level. There’s no way to determine how much of the change that the authors found resulted from migration to and from other countries, and how much was simply migration between states. For example, undocumented workers in Arizona, one of the states with E-Verify, might have chosen to go to California or New Mexico — states with comparable wages but without the E-Verify requirement. This doesn’t mean E-Verify would necessarily inspire the workers to move back to their home countries.
But even if E-Verify performed as advertised, why would deterring unauthorized immigration be worth a $30 billion deficit? As Senator Sanders noted back in 2016, “The so-called immigration problem we face today at this particular moment is a trumped-up and exaggerated problem.” Far from increasing, as he pointed out, the undocumented population has actually been declining recently. And there’s no sign that the causes of this drop-off will go away in the near future (although climate change might result in renewed immigration later).
“We don’t need a wall and we don’t need barbwire,” Sanders concluded. The same goes for E-Verify.
Pushing People Into the Shadows
Whatever else it may accomplish, E-Verify undoubtedly has one important effect: It drives undocumented workers into the country’s massive underground economy, where employers don’t report to the government and won’t be affected by an E-Verify requirement.
As it is, undocumented immigrants already tend to work in areas like construction, maintenance, landscaping and homecare, where employees are often paid off the books. The Social Security Administration estimated in 2010 that about 56 percent of unauthorized workers were employed in the informal economy. E-Verify is certain to intensify this trend. A study of the first two years of the E-Verify requirement in Arizona suggested that about 56,000 undocumented immigrants had dropped out of the regular workforce, but it appears that some 25,000 of these workers had simply switched to jobs that paid under the table.
In fact, the movement of immigrants from regular to underground jobs accounts for most of the CBO’s predicted deficit. The agency estimated that universal E-Verify would decrease payroll taxes over the 10 years by about $88 billion, reflecting an expectation that the requirement “would result in some undocumented workers being paid outside of the tax system — that is, they would move into the underground economy.”
An increase in irregular employment would hurt both immigrants and nonimmigrants. Informal sector workers are subject to greater exploitation — lower pay, few or no benefits and more dangerous workplace conditions. When people make less money, they also spend less, pay less in sales and real estate taxes, and have a harder time supporting their families.
In addition, there’s the ripple effect on wages. Economists disagree — often bitterly — about the extent to which lower wages for undocumented workers produce a downward pressure on authorized workers’ wages in the same field, but most agree there’s at least some effect. Clearly this downward pressure would be magnified if E-Verify forced more undocumented immigrants into lower-paying informal work.
Anti-immigrant politicians and pundits routinely charge that undocumented workers don’t pay taxes, burden social services with their citizen children, and drive down wages for authorized workers. These claims are greatly exaggerated, but there’s irony in the fact that the same anti-immigrant forces are promoting a policy that will actually aggravate the problems they pretend to care about.
Still, this doesn’t mean no one wins out from a universal E-Verify requirement. Employers do — not the legitimate small business owners, who would incur an extra expense of time and money in using the verification system, but the large corporations, which are generally careful not to employ undocumented workers directly. Instead, they employ the undocumented indirectly through subcontractors.
Subcontracting has grown dramatically in the last few decades. According to New York Times columnist Eduardo Porter, a 2016 study by Lawrence F. Katz and Alan B. Krueger “concluded that independent contractors, on-call workers and workers provided by contracting companies or temp agencies accounted altogether for 94 percent of employment growth over the last 10 years.” Many of these jobs are in fields with a concentration of undocumented workers — maintenance, warehousing, food services. Employment agencies can easily avoid complying with E-Verify or other rules by paying workers as subcontractors or off the books. If they get caught, the agencies can disappear overnight and pop up the next day under a new name. If big companies get caught using a labor agency that violates the law, they can claim ignorance, cancel the contract and find a new agency to provide them with workers.
How large is the benefit to employers? The CBO’s 2013 report projected that “employers whose workers move outside the tax system would have fewer wage deductions and therefore higher taxable business profits on their income-tax returns, boosting their income taxes. On net, JCT [Congress’s Joint Committee on Taxation] estimates that on-budget revenues would increase by about $49 billion.” This represents most of the government’s gain from E-Verify.
In other words, big business would reap huge profits from avoiding wage deductions; this doesn’t include the additional profits bosses can expect from paying workers less. The expected increase in profits may help explain why the pro-business National Review insists that the universal E-Verify requirement “should be non-negotiable.”