Will the immigration crackdown work?

The feds are renewing threats of jail for those who hire illegals. But while the latest rules stir fear, there's little hope for enforcement or reform.


(FSB Magazine) Washington, D.C. -- Bliss Nicholson flies to Mexico every year, not to soak up the sun in Cancún but to recruit legal migrant workers for his landscaping business in Middleton, Wis. With the local unemployment rate under 4%, few legal residents in his area care to work long hours in the hot sun planting trees or laying irrigation pipes for $10 an hour. Unlike many in his industry, Nicholson chooses not to hire illegal immigrants. So the annual road trip is his only recourse.

The federal government wants more employers to follow Nicholson's example. Secretary of Homeland Security Michael Chertoff recently announced that the Social Security system would be used to warn companies that hire undocumented aliens of possible penalties.

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But the new policy, in effect Sept. 15, will do little to discourage illegal hiring or help honest employers find legal workers. If anything, Chertoff's bureaucratic bluster shows how badly our existing immigration regime needs an overhaul.

Every year U.S. companies file more than 250 million W-2 forms with the Social Security Administration (SSA), which uses them to track lifetime earnings so that it can calculate how much each worker is owed at retirement. Occasionally the name and the Social Security number on the form don't match. If the agency has trouble with more than ten forms filed by the same employer, it sends the company a "no match" letter inviting it to clear up the discrepancies - a step mainly designed to help employers catch clerical errors.

Of course, W-2 discrepancies also arise when illegal workers provide fake Social Security numbers to their employers. Under the new rules, all "no match" letters now include a leaflet from the Bureau of Immigration and Customs Enforcement (ICE). Any employer who ignores the letters, the new ICE notice warns, could face a felony charge of illegal hiring practices, punishable by as much as six months in prison and a fine of $3,000 for each illegal worker. To avoid penalties, employers must confirm the status of their workers and fire any who prove to be illegal.

Nursery and Landscape Association. But Nicholson, 59, won't join his competitors in hiring illegals. His Bruce Co. (bruceco.com) employs about 600 workers (including 65 from Mexico) and generates $45 million in annual revenues. Each year Nicholson spends more than $25,000 to satisfy immigration authorities that he can't find legal U.S. residents to fill all his job openings. He places want ads, submits interview records, and fills out reams of paperwork. Only then can he receive an allotment of H-2B work visas from the U.S. Customs and Immigration Service.

Once Nicholson gets approval, he flies to Mexico City and waits in line at the U.S. Embassy for most of the day before being allowed to recruit workers. "There are people begging for work outside my doorstep," he says. "But if you resort to illegals, you set yourself up to be raided."

Yet the new warning letters will do little to discourage landscapers who cut cost corners by hiring illegal aliens. Not very many employers cross the SSA's threshold of ten faulty W-2 forms, because 74% of small businesses with payrolls employ fewer than ten workers. And privacy laws prevent the SSA from telling immigration authorities where its "no match" letters have been sent - leaving ICE in the dark, unless the firm in question is already under investigation.

The bottom line: Honest owners such as Nicholson must still compete on an uneven playing field with dishonest owners who break the law with impunity. Without comprehensive reform of our broken immigration system, government "crackdowns" will have little effect on owners or on the illegal immigrants many of them employ. Nicholson has one suggestion. "What we need," he says, "is an efficient and practical protocol for hiring guest workers each year."  Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.