Factoring & Small Business Blog

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Illegal immigration and the US economy: What’s the effect on small business?

October 16, 2012

Hiring illegal workers might seem like a quick fix to your short-term labor shortage, but the risks can far outweigh the benefits.

Few issues confronting the country are as complicated and controversial as the matter of illegal immigration. The government estimates there are roughly 12 million illegal residents in the United States – that’s roughly equal to the entire population of the state of Ohio.

According to most information, the majority of illegals live in border states – California, Florida, Texas, New York, and Arizona – but other states are experiencing the impact, too.

Is the illegal immigration issue a problem for small businesses? Many business owners seem to think so.

The National Federal of Independent Business – or NFIB – surveyed its members on the issue, and more than 90 percent consider illegal immigration to be a problem and 70 percent view it as a serious problem.

Critics point out negative economic effects of illegal immigration, saying that employers who hire illegal workers hurt the economy by providing incentives (jobs) that attract low-skilled workers who might ultimately burden government resources, and by making it harder to compete and turn a profit.

On the flip-side, some argue that illegal workers tend to take jobs that many U.S. citizens would refuse anyway, so the net effect on the economy – increased production from low-skill, low-wage positions – is positive.

But wherever you personally stand on the issue, hiring illegal immigrants is, well, illegal. You put yourself and your company at serious risk by considering adding an undocumented worker to your payroll.

More economic effects of illegal immigration: the risks of hiring illegals

According to the Wall Street Journal, the Obama administration has, since 2009, audited more than 7,000 companies suspected of hiring illegals, and handed out more than $100 million in fines. According to the Journal, that’s more that’s more than was imposed during the entire eight years of the George W. Bush presidency.

These audits are typically orchestrated by the Dept. of Homeland Security. As part of the process, employers are ordered to turn over their hiring records for inspection.

The government claims that no specific industries are targeted for review but, since illegal employees have generally been discovered working in agriculture, construction, landscaping, hotel and motel services, and food service, it’s a good bet that much of the attention is placed there.

Even more economic effects of illegal immigration: the penalties

Federal law makes it illegal for employers to hire, recruit, or refer for a fee any alien not authorized to work in the United States.

There are serious criminal and civil penalties in store for employers who are caught and convicted.

  • First Offense. $250 to $2000 fine per illegal employee.
  • Second Offense. $2000 to $5000 fine per illegal employee.

Good luck if you’re convicted more than twice. That’s when they really get nasty. Fines range from $3000 to $10,000 per illegal employee. And, if you’ve been shown to have demonstrated a “pervasive pattern of knowingly employing illegal immigrants,” you’re facing additional fines and up to six months in jail.

Also, in several cases, groups of legally documented workers (those that play exactly by the rules) have successfully sued employers of illegal workers, claiming that their wages were being held down by the presence of the illegals.

What to Do

Obviously, smaller companies don’t have the resources to match the human resource capabilities of their larger counterparts. But that doesn’t let you off the hook. Three actions can help.

1.) Establish employment screening policies that specifically try to prevent the hiring of illegal workers. Get a lawyer or human resource expert to help. This should prevent most problems, and, if someone does slip through, you can at least show immigration officials that you made your best effort to stop it.

2.) Consider using a staffing company to screen new hires. A reputable staffing firm will have processes in place to prevent illegal workers from becoming candidates for a position at your company.

3.) Trust your instincts. If something appears to be not quite right, it probably isn’t. Don’t ignore potential problems of employee eligibility. Again, consult a good labor or immigration lawyer if you have doubts.

Watch for more news about illegal immigration and the US economy here.

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David Dalton
David has more than 10 years of experience writing about marketing, communications and business development issues, largely in the fields of medicine, healthcare and financial services. He earned his MBA at Case Western Reserve University in marketing/finance.
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  1. I disagree, Immigration has been a prolonged issue in the U.S because politically it has guaranteed power over minority groups who ideally threaten the American ways. The issue of immigration has served as propaganda for America, which ironically also ads to the problem. But is the concern really the economy? The desperate need of immigrants to financially support their family leads to illegal actions that create an obligatory consideration to security. Not to say that these actions are acts of violence but instead a burden to the law, resources and past cases of discrimination or terrorism. When three out of every 100 people in America are undocumented or documented with fake papers; there is a serious and known security problem. According to “The White House Blog,” immigrants start businesses, boost earnings for American workers, develop technologies and companies, boost demand for local consumer goods etc.
    I propose that a limited worker program in which immigrants are given legal documentation for the purposes of employment would decrease illegal actions and benefit the economy. A form of citizenship such as the DREAM Act was found effective towards reducing the deficit.
    Although it is a tough thing to suggest, an immigration reform would help the government know who people are, where they are and what they do. Otherwise, many illegal immigrants have and will continue to get away with acts of crime due to the fact that they don’t have an identity. Lastly, the U.S government is responsible for encouraging immigrants to become invested in the American culture by learning English, paying taxes and following the law. (Consider “The Melting Pot”). As a result, immigrants would feel the need to act as a citizen and take care of this country as well as their home country.

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