If Americans truly want to ensure no unauthorized immigrants work in the United States, they better get ready to pay top dollar. E-Verify, the electronic national identification system contained in the Gang of Eight’s immigration bill, will cost government, businesses and workers at least $8.5 billion per year, according to my new study on E-Verify released yesterday. That's $13,000 per unauthorized immigrant denied a job.
E-Verify requires employers to submit Form I-9 information for comparison with information in databases held by the Social Security Administration and the Department of Homeland Security. People who advocate E-Verify as a cheap solution to illegal immigration need to understand this requirement is the most extensive regulation possible—it imposes requirements not just on every single business in America, but every single American citizen. Even small expenses distributed among such a large population will produce major costs.
This study basically accepted all federal data about E-Verify at face value and attempted to estimate its impact on the entire economy using the government’s own assumptions. First, as for government, the Congressional Budget Office estimated a national E-Verify mandate would cost, on average, $1.22 billion annually, not including DHS personnel costs. Add $227 million for the 5,000 new DHS enforcement agents called for in this bill, and the cost jumps to $1.45 billion.
But the big costs come from the impact on employers. Based on the estimates in the DHS’s Regulatory Impact Analysis for its 2008 E-Verify mandate for federal contractors, employers nationwide would spend $4.1 billion setting up, training and implementing the new system. That's nearly $2.4 billion more than the estimated cost to businesses under the White House draft legislation, which exempted small businesses. Annually, employers will spend $2.55 billion operating system checks, based on DHS assumptions alone. This estimate is close to a 2011 Bloomberg Government report that found a national E-Verify mandate would cost businesses $2.6 billion annually (a number that actually ignored costs to 76 percent of businesses).
But the costs to businesses don’t end there. The legislation also requires employers to keep workers who are initially not confirmed to allow them time to sort out errors. This essentially means employers must hire, train and pay workers even though the vast majority of whom will be shown to be unauthorized. No one even has attempted to estimate these costs. This study found that, based on estimates of worker turnover by economist Heather Boushey and Sasha Corp., a management consulting firm, the provision will cost businesses almost $4 billion annually based on the current E-Verify rejection rate (which would result in a measly 650,000 rejections per year nationally).
Let’s not forget the impact on employees, who will feel all these costs in the form of lower wages. Beyond this nasty effect, authorized employees also will have to sort out at least 1.8 million erroneous initial non-confirmations at SSA or DHS offices at a cost, based on DHS’s 2008 RIA assumptions, of $280 per error. Moreover, recent USCIS testimony stated “94 percent of final non-confirmations are issued correctly,” which means 6 percent are issued incorrectly to authorized workers. Nationally, this would mean nearly 40,000 people could lose their job because of E-Verify errors, costing them $134 million per year in lost wages.
At $8.5 billion per year, Americans would be paying, at current rejection rates, about $13,000 per unauthorized immigrant denied a job—assuming these don’t reapply under a false identity, which, as the most recent independent study of E-Verify showed, 54 percent of unauthorized immigrants do to beat the system. Is it all worth it? I would say that it clearly is not.