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

by | Small Business Consulting

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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