Electronic Verification Programs Effective in Curbing Illegal Employment

By Jessica Vaughan June 2009

Testimony Prepared for the Pennsylvania House Labor Relations Committee in Harrisburg, Pennsylvania

June 11, 2009

Chairmen and members of the Labor Relations Committee, thank you for the opportunity to be here to testify on House bills 1502 and 1503 -- Mr. Galloway’s bills to prevent illegal employment on public works projects and in the construction sector in Pennsylvania. I commend the committee for taking up this issue, which is so important as states prepare to take advantage of stimulus monies that will soon become available.

For several years I have advised state and local lawmakers on how to increase compliance with immigration laws and prevent illegal employment, primarily through use of electronic verification tools that the federal government provides. These bills take a responsible approach and, based on what I have observed in more than a dozen states that have implemented similar initiatives, they will be highly effective without overreaching the state’s authority, disrupting legitimate businesses, or leading to discrimination against immigrants. They will help ensure that construction jobs and jobs funded with public money will go only to citizens and legal immigrants. The result will be a more stable labor market that is likely to result in better wages and working conditions in the construction sector.

Background: Illegal Employment Produces Labor, Fiscal and Public Safety Problems.

Illegal employment has been a problem for decades, but has spread and worsened considerably in the last 15 years. Illegal migration, which is largely comprised of less-skilled and less-educated workers, has significantly increased the number of workers in certain U.S. industries, especially farming, construction, food preparation, and custodial work. As the supply of workers has increased over the years, wages and working conditions in those sectors have deteriorated. This trend has adversely affected native and immigrant workers in those industries. For instance, research by Harvard economist George Borjas has found that the increase in labor supply caused by immigration has caused the average earnings of natives to drop by nearly $2,000/year, with the negative effects even more severe for less educated and/or black and Hispanic workers, who are often in direct competition with immigrant workers.1

Immigration to Pennsylvania increased by 60 percent from 2000 to 2007, adding more than 200,000 immigrants to the state. Nationwide, we estimate that more than one-half of post-2000 arrivals were illegal immigrants.2 The Pew Hispanic Center has estimated that between 125,000 and 175,000 illegal immigrants lived in Pennsylvania in 2005.3 While we have no exact figures, we (and Pew) estimate that approximately 14-15 percent of the workers in the construction industry are illegal aliens. According to the Bureau of Labor Statistics, in April, 2009 there were about 234,000 construction workers in Pennsylvania. Even assuming that the rates of illegal employment are less here than in some other states, that means there are somewhere between 18,000 and 35,000 illegal construction workers in Pennsylvania.

Illegal immigration causes labor market disruption by artificially boosting the supply of workers. In addition, some observers argue that employers in the industry deliberately choose illegal workers over legal workers because they can take shortcuts with training, safety standards and tax payments. Quoted in a recent building trade publication, Anthony Gomez, of the International Union of Bricklayers and Allied Craftworkers in the New Orleans area, said, “There isn’t an American who can beg, borrow or steal a job. If you go on some jobsites looking for work, tools in hand, they will tell you straight to your face that if you aren’t Spanish, you don’t even need to apply.” Art Lujan, of the Gulf Coast Construction Careers Center, echoed in the same article: “On some of these large, federal projects around town, you can see 75 to 80 Hispanic folks working with no safety gear. Since immigrants are often willing to work for less than the prevailing wage, it’s difficult to get apprentices hired. For a lot of employers, it’s easier to bring in their own workforce and 1099 them as subs, but they really aren’t paying taxes.”4

In addition to the labor market effects, illegal employment brings fiscal strain to many communities. The influx of less skilled and less educated workers means more individuals and families who lack health insurance and who need social services. These costs fall largely on the state and local governments, even as any taxes paid by these workers go to the federal government. The National Research Council found that the annual net fiscal cost of immigration was $10 billion per year at the federal level. The Federation for American Immigration Reform has estimated that illegal immigration imposes an annual cost of $285 million in Pennsylvania.

There can be public safety consequences to widespread illegal employment as well. In conducting a Department of Justice-funded study of immigrant gangs last year, I was told by federal and state law enforcement agents that a significant share of transnational gang members have been able to obtain illegal employment in the construction industry, among other sectors, because these employers tend to be less vigilant about verifying the status of their workers. Typically, gang members will cluster at certain employers once they determine that the employer will look the other way on their immigration status, or if they can get away with using false documents. Their employment provides them with a foothold in the community on which they can establish their criminal organization and activity.5

Until recently, the federal government devoted little attention to the problem, influenced heavily by an alliance of business interests and ethnic advocacy groups who benefit from lax enforcement of immigration laws. Because the federal government lacks the resources to deal with the problem of illegal immigration problem on its own, and because the economic, fiscal, and public safety consequences of illegal immigration fall largely on the states, state leaders must do what they can to help gain control of this problem.

To date there are 14 other states (see chart below) that require some or all employers to use E-Verify and two states I know of that require some employers to use SSNVS (Arizona and North Carolina). In addition, in the last few years, the federal government has stepped up enforcement of immigration laws. The result has been a modest, but significant decline in the size of the illegal population. We estimate that the illegal alien population declined by 11 percent from mid-2007 to mid-2008, primarily as a result of the increased level of enforcement generated by both the Bureau of Immigration and Customs Enforcement (ICE) and state and local initiatives.6

Verification Tools in HB 1502 and 1503

HB1502 and 1503 will require employers in the public works and construction sectors to use the federal E-Verify7 and Social Security Number Verification Service (SSNVS)8 to ensure that these jobs go to authorized workers. In addition, the bills provide for auditing of employer compliance through the Pennsylvania Department of Labor. If employers do not use the program and hire illegal workers, they may lose their ability to operate in the state. The combination of mandatory enrollment in these proven electronic systems and an effective random and complaint-driven auditing and enforcement mechanism will accomplish the objective of preventing illegal employment and providing a level playing field for Pennsylvania employers.

E-Verify. E-Verify is a free electronic verification service provided by U.S. Citizenship and

Immigration Services (USCIS), the immigration benefits arm of the Department of Homeland Security (DHS). New DHS secretary Janet Napolitano, who signed the nation’s first state law that mandated E-Verify for all employers (and SSNVS for public employers), has affirmed hers and the Obama administration’s confidence in the program. In a speech last week, Napolitano said, “'We'll be asking the Congress as part of our ongoing efforts in the immigration field to reauthorize E-Verify, to put more money into E-Verify as part of our budget, by the way.”9

After completing a one-time 30-minute tutorial, participating employers must verify the status of all newly-hired workers within three days of hire, using information that an employer is already required to collect on the Form I-9. Employers key information (name, date of birth, and Social Security number or immigration documentation) into a simple form and transmit via the internet to USCIS, which processes the query in coordination with the Social Security Administration. Employers may only screen new hires and may not delay training, assignments or otherwise hold up the worker while waiting for confirmation. Nearly all workers are confirmed instantaneously, but a few will uncover discrepancies between the information submitted by the employer and the information the government has on file, usually related to a name change. These discrepancies result in a “tentative non-confirmation” or “yellow light”. Minor discrepancies, such as typos or name mis-spellings will not result in a TNC. Workers must be notified of a discrepancy, and have eight working days to resolve it. Most discrepancies are resolved with a telephone call. If the worker does not contest the tentative non-confirmation, the employer must terminate the worker or notify USCIS that it will continue to employ the worker.

When discussing or evaluating E-Verify, it is important to consider the actual current record of the program, rather than out-dated reports or estimates of performance. USCIS has commissioned several independent evaluations of E-Verify over its 13-year existence and also reports to Congress on a regular basis. These evaluations and reports are available on the USCIS web site as noted above.

  • 96.1% of all queries receive a positive response or “green light” confirmation of authorization without delay. The response is usually received in 15-20 seconds.

  • 98% of eligible workers are confirmed instantaneously.

  • 3.9% of queries receive a “yellow light” tentative non-confirmation.

  • 3.5% of the workers will not contest the “yellow light.” The most common reason for a discrepancy is that the worker is an illegal alien using a false SSN and/or immigration document.

  • 0.4% of the workers who are “yellow-lighted” will take steps to resolve the discrepancy.

  • 90% of discrepancies are resolved by a telephone call to USCIS or SSA.

  • 96% of employers who use the program feel it is “not a burden.”

  • 98% of employment-related identity theft can be detected by E-Verify.

  • 51% of the employers who use E-Verify are small businesses.

  • 14% of all non-agricultural new hires nationwide are now screened through E-Verify.

Nationwide, there are 117,000 employers using E-Verify, with another 1,000 enrolling each week. Last year, the system handled 6.6 million queries. The system is equipped to handle 40 to 60 million queries per year. The employers include temporary services agencies, technology companies, government contractors, restaurants, hotels, and many other types of employers. However, there are very few construction-sector employers enrolled in E-Verify.

As of the end of February, 2009 there are 2,003 employers using E-Verify at 16,345 work sites in Pennsylvania, generating 57,102 queries to the system. In FY-2008 there were a total of 118,708 queries.

Common concerns voiced about E-Verify. Some organized interest groups have launched campaigns nationwide objecting to mandatory E-Verify laws. These objections usually focus on the alleged “high error rate” of E-Verify or the potential for employer misuse or discrimination, and are usually based on out-dated information about E-Verify performance. Some common complaints and answers:

  • “The Social Security database that supports E-Verify has millions of errors.” This complaint is based on a 2006 audit of a sample of records in Numident, the SSA database.10 It “applauded” the agency for the database accuracy. It noted that the database does have some errors, most of which involve the records of individuals (often deceased) who are not in the work force. As noted above, the actual track record of E-Verify is more important -- 98 percent of eligible workers are instantly confirmed, and 90 percent of workers flagged with a TNC are not ever confirmed. Only 0.4 percent of workers are yellow-lighted, and it is to their benefit to correct their record. Expanding mandatory use of E-Verify will actually work to increase the accuracy of these federal databases, by prompting workers to update the Social Security database well before it is time for them to begin collecting Social Security benefits.

  • “E-Verify can’t detect identity theft and fraud.” False – According to the SSA, nearly all identity fraud committed for the purposes of employment involves the use of someone else’s number with the worker’s own name. That type of fraud would generate a “yellow light” in E-Verify. In addition, USCIS recently instituted improvements to the system to detect identity theft and fraud. First, when an individual has submitted immigration documents for verification, the system returns a copy of the photograph the government has on file for that person, enabling the employer to detect imposters. Second, USCIS has established a monitoring unit to track use of SSNs and A-numbers (immigration identifiers) to investigate possible fraudulent multiple use of bonafide numbers.

  • “47% of E-Verify employers are using it to illegally pre-screen new hires.” False – Actually, the evaluation of E-Verify done by Westat found that in 2006 a total of 16 percent of employers were pre-screening with E-Verify. More than one-third were temporary services agencies. Nearly all of them (84%) who did pre-screen also notified the worker of the result on the same day, so it was clearly not used to discriminate or disadvantage the worker, but to streamline the process. USCIS is addressing this problem through outreach and training.

  • “E-Verify is discriminatory because most of the TNCs are received by immigrants.” Out-dated information -- Before May, 2008 it was true that a large share of the small number of eligible workers who received TNCs were naturalized citizens who had not notified SSA that they had become citizens. USCIS has since implemented a new way of confirming these individuals, and dramatically reduced the number of naturalized citizens who receive a TNC. Evaluations of the program have shown that E-Verify actually helps reduce discrimination as employers report that they feel more comfortable hiring immigrants, knowing that their status will be confirmed.

Employers Positive About E-Verify. An independent evaluation of E-Verify commissioned by DHS found that participating employers overwhelmingly report positive experiences with the program – 96 percent think that it is an effective tool for status verification; 92 percent say verification does not overburden their staff; and 93percent think E-Verify is easier than the existing I-9 process.

The attitude of human resources professionals nationwide is similarly enthusiastic – a recent survey by the Society of Human Resource Management found that 92% of its members support electronic immigration status verification.11

If the program were to be made mandatory, the only cost would be to those few businesses who do not currently have a computer or do not use the Internet. Companies who for some reason do not wish to establish Internet connectivity or use the program themselves can hire one of more han 300 private-sector "designated agents" to conduct the E-Verify check for them, much as many companies use private payroll or tax services. These services reportedly cost as little as $7.00 per new hire.

Right now, the biggest problem with E-Verify is that it is voluntary. Those Pennsylvania employers that wish to continue hiring illegal aliens can simply excuse themselves from the process. This is a significant disadvantage for law-abiding employers who must compete with them, and for those U.S. and legal immigrant workers who are shut out of those jobs. The audit and enforcement provisions in these bills will be a strong disincentive for immigration scofflaws.

Legal Challenges to State E-Verify Laws. State laws mandating use of E-Verify for some or all employers in a jurisdiction have been upheld in several courts. The most important decision was the September, 2008 ruling in the 9th U.S. Circuit Court of Appeals that upheld Arizona’s law mandating use of E-Verify for all employers. In addition, courts in Rhode Island, Missouri and Oklahoma have upheld similar, although less expansive, laws. The following is a list of all jurisdictions that have passed laws on E-Verify.

Arizona Legislation, effective 1/1/08 All employers use E-Verify, Public agencies use SSNVS
Colorado Legislation, effective 8/7/06 State agencies and Public contractors use E-Verify
Georgia Legislation, 4/17/06 Public employers, contractors and sub-contractors use E-Verify
Idaho Executive Order, 12/13/06 State agencies and contractors use E-Verify
Minnesota Executive Order, 1/7/08 State agencies and contractors use E-Verify
Mississippi Legislation, 7/1/08, phased
All employers use E-Verify
Missouri Legislation, effective 1/1/09 All state agencies and contractors, and certain recipients of subsidies, tax abatements or loans use E-Verify
Nebraska Legislation, effective 10/1/09 State agencies and contractors use E-Verify; certain tax incentives available to private employers who use E-Verify
North Carolina Legislation, 8/23/06 All state agencies, offices, universities and hospitals use E-Verify and SSNVS
Oklahoma Legislation, 5/15/07 All state and local government agencies and contractors use E-Verify
Rhode Island Executive Order, 3/27/08 All state agencies, contractors, vendors and grantees use E-Verify
South Carolina Legislation, 6/4/08 All employers must use E-Verify or accept only state licenses or other secure documents
Utah Legislation, 7/1/09 All public entities and their contractors use E-Verify

SSNVS. The provisions in HB 1502 and 1503 to require public works and construction-sector employers to use SSNVS, the Social Security Administration’s electronic SSN and wage report verification service, represent a major step in reducing employment-related identity theft and illegal employment in Pennsylvania. According to the Federal Trade Commission, in 2008 there were more than 850 complaints of employment-related identity theft in the state; in addition, many victims of identity theft never know their records have been compromised.12

SSNVS is less well known than E-Verify. The purpose of the service is to ensure integrity in wage reporting, not to verify immigration status. But experience has shown that many of the people using false or stolen SSNs are unauthorized workers. The main added value provided by SSNVS is that employers can identify which of their current employees have discrepancies in their SSA records.

The regulations governing SSNVS are very similar to the E-Verify regulations. It uses Numident, the same database used by E-Verify for SSNs. Employers may not use the service to pre-screen workers, and there are specific steps the employer must take to address any discrepancies that are uncovered. I have found no recent reports on the number of employers using SSNVS, but according to one official report, in 2005 there were about 12,000 employers who used the service. In that year the agency processed 25.7 million verifications (nearly four times the number E-Verify processes today).13

The program has not been evaluated to the same extent as E-Verify, but the SSA has conducted some reviews. They have found that employers are satisfied with the program; in the 2005 audit mentioned above, 92 percent of employers rated the service as “excellent.” The auditors found widespread conformance with program regulations.

Two states that I know of -- Arizona and North Carolina -- have mandated use of SSNVS for public employers. Then-governor Janet Napolitano issued an executive order to have all state agencies in Arizona begin using the program in December of 2005. Since then, the state Department of Administration submits the records of the state’s 42,000 employees to SSA approximately every five weeks. According to one report, in the first year, the service identified about 400 discrepancies. Most of these were not illegal workers, but workers who had not informed SSA of their married name or who used a middle name as a first name on their employment forms. The numbers of mis-matches have declined over time as employees clean up their records. Overall, more than 99.9 percent of worker records have been checked without problem, an indication of the accuracy of this database for workplace verification purposes.14

In late 2006, the North Carolina state auditor’s office conducted a review of SSN and wage records at several public employers. The review including a screening of wage records with SSNVS, which is now required for public agencies under state law. The audits and SSN reviews uncovered a pattern of problems with use of false SSNs at North Carolina institutions. For example, at North Carolina Central University, the audit found 28 student and non-student workers with invalid SSNs, 14 workers with numbers on file that belonged to deceased persons, and another 18 that were discovered to be invalid as a result of tips from employees. About half the discrepancies turned out to be the result of data entry errors by university payroll staff, so the workers benefited from this discovery and could correct their records to receive proper credit for earnings. Most of the rest of the employees identified in the review admitted that they obtained the invalid SSNs from other people, and a few simply resigned or disappeared rather than be interviewed about the discrepancy. The North Carolina SSNVS audits at other institutions uncovered not only unauthorized workers on the agency payrolls, but also individuals who were trying to mask their identity to avoid criminal offender screening and child support obligations.

Enforcement Measures in HB 1502 and 1503

One key feature that will help ensure the success of employment verification programs in Pennsylvania to an even greater extent than some other states have experienced is the provision for the Department of Labor and Industry to investigate credible complaints of non-compliance and to conduct complaint-based and random audits of employers covered under the bills. In addition, non-compliant employers risk forfeiture of their ability to operate in the state. It is reasonable to expect that most employers will abide voluntarily by the requirements of these bills if they are enacted. According to my research, the main reason more employers are not now using E-Verify is not because they oppose or distrust the program, but because they know don’t have to use it. That phenomenon of voluntary compliance will produce the greatest results.

Some examples: In Arizona, which has a complaint-driven enforcement mechanism, and which provided funding for the county attorneys to investigate and prosecute violations, there have been only one or two actual prosecutions. On the other hand, in Georgia, which has no strong enforcement mechanism, and where the legislature has declined to fund the state audit provision, there are reports that few state and local agencies are complying with the mandate to enroll in E-Verify. Colorado created a special enforcement unit to investigate violations but, to my knowledge, the unit has prosecuted no violations. In no states has there been a need for significant state resources to police the new law; meanwhile, reports from these states indicate that the law is having the desired effect as large numbers of workers who were employed illegally depart the state voluntarily.

We also can expect that some employers will ignore the law or seek to evade it. It is only fair to the law-abiding employers that the scofflaws be penalized. This legislation provides reasonable and constitutional sanctions that are limited to a company’s license or permission to do business in Pennsylvania, as is permitted in federal law, or that pertain to filing a truthful attestation that they are complying with verification requirements, as is also permitted under federal law.

The audit provision of these bills is very important, if the state does it right. It provides a mechanism for the Department of Labor and Industry to check to see that employers have signed up and are using the verification programs. More importantly, if done properly, it provides a valuable service to employers by showing them where the vulnerabilities are in their hiring process. For example, Beaufort County, South Carolina has established a random audit process that will eventually cover all businesses licensed in the county. The review includes an examination of the employment authorization screening process and the status of any independent contractors used.15 As in the case of the North Carolina agencies, these audited employers were pleased to have had the opportunity to identify and fix weaknesses in their process with the help of the state auditors, rather than in the context of an ICE audit or raid, where they are potentially subject to federal penalties or criminal charges. And, as in the North Carolina audits, these reviews invariably turn up instances of document fraud that might not otherwise have been detected. Nearly ten percent of the businesses audited in Beaufort County had hired employees who had committed identity theft.

I would strongly encourage the Department of Labor and Industry to engage the services of a consultant or contractor with experience in immigration law enforcement and/or document fraud to help make these audits meaningful for employers. This is especially important in light of indications that ICE leadership under the Obama administration intends to target more employers for prosecution. John Morton, the new assistant secretary of ICE has said that he may seek changes in the law to make it easier to make a case against employers, and other ICE officials have said that ICE will more frequently offer illegal employees incentives to cooperate in the prosecution of their employer.

Thank you again for the opportunity to testify, and I would be pleased to answer any questions or provide additional information upon request.

End Notes

1 George J. Borjas, Increasing the Supply of Labor Through Immigration: Measuring the Impact on Native-born Workers, Center for Immigration Studies, May, 2004, http://www.cis.org/sites/cis.org/files/articles/2004/back504.html.

2 Steven A. Camarota, Immigrants in the United States 2007, Center for Immigration Studies, November, 2007, http://www.cis.org/immigrants_profile_2007.

3 “Estimates of the Unauthorized Migrant Population for States Based on the March 2005 Current Population Survey,” http://pewhispanic.org/files/factsheets/17.pdf.

4 Angelle Bergeron, “Immigration Agency Unable to Measure Undocumented Workers in Gulf States,” The Engineering News Record, June 5, 2009, http://enr.ecnext.com/coms2/article_bmwf090605GulfStatesWo.

5 Jessica M. Vaughan and Jon D. Feere, Taking Back the Streets: ICE and Local Law Enforcement Target Immigrant Gangs, October, 2008, http://www.cis.org/ImmigrantGangs.

6 Steven A. Camarota and Karen Jensenius, “Homeward Bound: Recent Immigration Enforcement and the Decline of the Illegal Alien Population, http://www.cis.org/trends_and_enforcement.

7 For more on E-Verify, see http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7....

8 For more on SSNVS see http://www.ssa.gov/employer/ssnv.htm.

9 Janet Napolitano, quoted in Washington Technology, June 4, 2009, http://washingtontechnology.com/articles/2009/06/04/web-everify-napolita....

10 Office of the Inspector General, Social Security Administration, “Accuracy of the Social Security Administration’s Numident File,” December, 2006, http://www.ssa.gov/oig/ADOBEPDF/audittxt/A-08-06-26100.htm.

11 Jessica Collison, 2006 Access to Human Capital and Employment Verification: Survey Report, Society for Human Resource Management, March, 2006.

12 http://www.ftc.gov/sentinel/reports/sentinel-annual-reports/sentinel-cy2....

13 Office of the Inspector General, Social Security Administration, “Employer Feedback on the Social Security Administration’s Verification Program,” A-03-06-26106, December, 2006.

14 Richard Ruelas, “State effort proves that Social Security info can be verified,” Arizona Republic, October 16, 2006.

15 See Jessica Vaughan, “South Carolina County’s Innovative Business Auditing Program Curbs Illegal Employment,” Center for Immigration Studies, January 10, 2009, http://www.cis.org/vaughan/SCCoBusinessAuditing.