201901

January 31, 2019 7:39PM

The Facts About E‑Verify: Use Rates, Errors, and Effects on Illegal Employment

E-Verify is the federal government’s employment eligibility verification system. In 1986, Congress forced all employers and employees to complete the Form I-9, attesting to the employee’s authorization to work. In the decade that followed, it became clear that this requirement had no effect on illegal employment, so in 1996, Congress created E-Verify as a pilot program to provide employers an electronic way to verify the authenticity of the information provided by their hires.

How E-Verify Operates

E-Verify compares an employee’s I-9 information to information in Social Security Administration (SSA) or Department of Homeland Security (DHS) databases. Employers are not required to use E-Verify, but those who voluntarily participate must follow these steps:

  • Fill out the Form I-9 within 3 business days;
  • Review a photo ID with a name matching the name provided on the Form I-9;
  • Enter the employee’s name, date of birth, Social Security Number, and—if a noncitizen—alien identification number into E-Verify’s website within 3 business days;
  • If the information fails to match the information at SSA or DHS:

    • The employee will receive a Tentative Non-Confirmation (TNC);
    • The employee has 8 business days to challenge the TNC by going to a DHS or SSA office.
    • If the employee fails to challenge or is not confirmed after a challenge, the employee and employer will each receive Final Non-Confirmation (FNC) notices.

If an employee receives an FNC, the employer must immediately terminate their employment.

Use of E-Verify

Until 2008, virtually no U.S. employers had enrolled in E-Verify. That year, President Bush issued an executive order requiring all federal contractors to use E-Verify, and the same year, Arizona became the first state to mandate that all employers use the program. In 2008 and every year after that, the share of employers using E-Verify has grown approximately 1 percentage point. In 2018, DHS had enrolled 821,771 employers in E-Verify—amounting to 13.5 percent of all employers in the United States (Figure 1). This means that 86.5 percent of U.S. employers refused to use E-Verify in 2018.

As of 2014, E-Verify employers were skewed toward the larger side relative to their share of total employers. As Figure 2 shows, less than 13 percent of E-Verify users had less than 10 employees, while 61 percent of all employers did. Almost 40 percent of E-Verify users had more than 100 employees, while just 21 percent of all employers did. It is likely that larger employers need to use E-Verify to contract with the federal government or do businesses in multiple states, some of which mandate E-Verify.

The number of hires run through E-Verify also increased from 2005 to 2018but at a faster pace. From 2005 to 2018, the number of E-Verify queries increased from less than a million to more than 36 million (Figure 3). The largest jump occurred in 2010 following the 2009 implementation of the federal contractor regulation. The number of queries as a share of total hires increased from 1 percent to 37 percent from 2005 to 2018. In other words, at least 63 percent of hires were not run through E-Verify (some hires could be subject to multiple queries).

E-Verify Outcomes

The number of hires denied employment has increased over time as well, but not nearly as fast as the number of new queries. From 2007 to 2018, the number of rejected new employees doubled from 173,409 to 351,836, but the number of FNCs as a share of total queries plummeted from 5.3 percent of queries to 1 percent (Figure 4). For context, unauthorized immigrants were 5.4 percent of the labor force in 2007 and 4.8 percent in 2016, according to the Pew Research Center. Altogether, since 2007, E-Verify has rejected just over 3 million hires.

During this time, many legal workers had their jobs blocked by E-Verify, either temporarily or permanently. Errors occur both when an employer enters the information or when a government employee at SSA or DHS incorrectly creates a legal worker’s record. Erroneous TNCs are identified after the employee challenges the error and vindicates their right to work. Since 2005, 568,283 legal employees have received a TNC and successfully challenged it (Figure 5). In 2018, some 58,362 workers proved their right to work. Nearly 36 percent of those challenges took more than 8 days to resolve, though the government failed to disclose the length beyond that.

Employees can also receive erroneous final non-confirmations (FNCs) because employers toss their applications without telling them, because they fail to get to the SSA office within 8 business days, or because they cannot disprove the database error. This number has only been estimated once by an independent statistics company, Westat, hired by the Department of Homeland Security. For purposes of estimating other years, Figure 4 assumes that the FNC error rate improved as much as the TNC error rate. Overall, about 0.2 percent of hires received errors in 2018—amounting to nearly 70,000 employees.

State Mandates for E-Verify

Starting with Arizona in 2008, 20 states have passed laws mandating E-Verify for state agencies or state contractors. Eight states—Arizona (2008), Alabama (2011), Mississippi (2008), South Carolina (2011), North Carolina (2011, 25+ employees), Georgia (2013, 10+ employees), Utah (2010, +15 employees), and Tennessee (2011, 6+ employees)—require E-Verify for all or most new hires (Figure 6).

Despite these mandates, however, a very significant number of hires in these states go unchecked through the E-Verify system based on Census data. As of 2017, the most compliant state was Alabama (Figure 7) with at most over 60 percent of new hires run through the system (again, queries and hires don’t quite match up because queries can be done multiple times on a single employee). The share in Mississippi has not risen above 50 percent except for a single quarter. This is despite the fact that Arizona promises a business “death penalty” for those who repeatedly fail to comply, and South Carolina regularly fines employers for missed checks (not necessarily for hiring illegal immigrants).

Wages for illegal immigrants in Arizona—which has had the mandate the longest—declined 8 percent for men and 1 percent for women, according to one study by Dallas Federal Reserve economists. The problem for advocates of E-Verify is that this amounts to a very small change in the expected wage gain for illegal immigrants coming to the United States. Indeed, they would receive a 253 percent wage boost by moving to America before the E-Verify mandate and a 240 percent wage gain after it (Figure 8). The study also found that due to the lower wages, immigrants worked more to make up for it, and more illegal immigrant women entered the labor force. In other words, illegal immigrants continued to work, but for lower wages.

Nationwide, the surge of E-Verify queries has not coincided with any significant reduction in the number of illegal workers. From 2007 to 2016, the number of illegal workers hovered around 8 million, even as the number of E-Verify queries increased tenfold (Figure 9). The only independent audit of the E-Verify system in 2012 concluded that half of all illegal workers run through the system evaded detection, primarily by borrowing the identification of legal workers.

Conclusion

E-Verify has become one of the largest government surveillance programs in the United States. It checks the identification numbers of tens of millions of legal workers per year, and hundreds of thousands of disproportionately larger businesses use the program. Despite this success, most businesses refuse to adopt the program, and most employees are not checked against the system. Only four states have adopted E-Verify mandates covering all private employers, and even these states cannot manage to enforce their mandates. Through erroneous non-confirmations, E-Verify has harmed nearly three quarters of a million legal workers and has not stopped illegal employment.

January 31, 2019 2:00PM

DEFENSE DOWNLOAD: Week of 1/31/19

Welcome to the Defense Download! This new round-up is intended to highlight what we at the Cato Institute are keeping tabs on in the world of defense politics every week. The three-to-five trending stories will vary depending on the news cycle, what policymakers are talking about, and will pull from all sides of the political spectrum. If you would like to receive more frequent updates on what I’m reading, writing, and listening to—you can follow me on Twitter via @CDDorminey.  

  1. "Warren, Smith introduce bill to bar US from using nuclear weapons first," Joe Gould. Two Democratic leaders just introduced a bill, "The No First Use Act," to make it the stated policy of the United States not to use nuclear weapons first in a conflict. This is in direct competition to the administration's Nuclear Posture Review that reserved the right to use nuclear weapons in response to "significant non-nuclear strategic attacks." 
  2. "Lawmakers renew challenge to Trump over Yemen, Saudi Arabia," Joe Gould. A bipartisan coalition in Congress is reintroducing a resolution in both the Senate and House to withdraw American support for Saudi Arabia's war on Yemen. A similar piece of legislation, SJ Res 54, passed the Senate 56-41 back in December but the House did not vote on the issue.  
  3. "Mike Pompeo to speak at Missouri-Kansas Forum amid Senate bid speculation," Rachel Frazin. Rumors are circulating that Secretary of State Mike Pompeo may be leaving his post to run for the seat that Pat Roberts (R) of Kansas will vacate in 2020. 
  4. "Great Power Competition, Part I," Emma Ashford, Trevor Thrall, & Joshua Shifrinson. This episode of the Power Problems Podcast addresses the emerging era of great power competition and features an in-depth discussion on the rise of China. 
January 31, 2019 12:47PM

The Fed Marches On

So it has come to pass. In his recent press conference, Chairman Jerome Powell has at last made official the Fed's plan to stick to its post-crisis "floor" system of monetary control, which uses changes in the interest rate paid on banks' excess reserve balances, rather than routine open-market operations, to keep the federal funds rate at its assigned target. Powell has also affirmed previous reports that the Fed may stop shrinking its balance sheet well before it reaches $3 trillion — the (itself still hefty) minimum it might reach if the Fed kept to its original unwind plan. The unwind might even end before the Fed's assets fall below $4 trillion, or not far from where they are today.

Although he's generally not one for making forecasts, yours truly has long anticipated both developments, in writings here on Alt-M and elsewhere. He has said as well that the Fed is likely to start Quantitatively Easing again at the first hint of another crisis. I'll add here the prediction that it will do so before, or instead of, setting its IOER rate back to zero, just as happened during the last crisis. In short, I repeat my belief that it's quite possible that Jerome Powell will have the dubious honor of becoming the Fed's first "Six Trillion Dollar Chairman." And because, under a floor system, the size of the Fed's balance sheet has no direct bearing on the level of short-term interest rates, there's practically no limit to how big it might get without interfering with the Fed's ability to hit its interest-rate targets.

Fed officials insist, of course, that the advantages of this brave new regime outweigh any dangers it poses, and that they've only decided to stick to it after carefully weighing its pros and cons. Perhaps. But I have my doubts.

There are, first of all, powerful bureaucratic motives favoring the change — motives that have nothing to do with the general public's well-being. For starters, the new regime makes life easy for the folks at the New York Fed, who are freed from having to study and anticipate changes in the demand for reserves, and "autonomous" changes in the stock of reserves, in order to plan and then undertake open-market operations aimed at offsetting those changes. Were that reduced labor load to translate into a reduced New York Fed staff, the bureaucratic gain it entails would be a gain to the general public as well. But until I hear of desk staff packing up their belongings, I'm inclined to regard that as a hypothetical possibility only.

If former Cato Chairman Bill Niskanen's budget-maximizing model of bureaucrats has any merit, Fed officials have a second important motive for favoring a floor system and the larger balance sheet that system helps them to rationalize; namely, a larger budget consisting of the additional revenue generated by a substantially increased asset portfolio. Finally, Willem Buiter has argued that Fed officials have reason to resist a more complete balance sheet unwind because such an unwind "is likely to reveal the true extent of the central bank's quasi-fiscal activities during the crisis and its aftermath."

The Fed's official reasons for keeping its floor system are, of course, unrelated to any of these bureaucratic motives. Instead they point out that the new system enhances banks' liquidity. They also claim that the greater volatility since the crisis of "autonomous" reserve-balance determinants — including the size of Treasury General Account balance — now make it very difficult, if not impossible, for the Fed to gauge and offset those autonomous factors. Yet it would have to do that to keep interest rates stable were it to return to a corridor system.

Are such arguments decisive? Hardly. For whatever their merits (and they have less merit than their proponents claim), they represent but one side of things. A floor system also has disadvantages compared to a corridor system — disadvantages that Fed officials consistently choose to overlook.

A floor system does away with unsecured interbank lending on the Fed funds market, eliminating that important venue for interbank monitoring. It involves a greater degree of Fed interference with private-market resource allocation, and particularly so when the Fed's portfolio consists of longer-term or risky assets, violating the long-standing Fed principle that it should "Structure its portfolio and undertake its activities so as to minimize their effect on relative asset values and credit allocation within the private sector." A floor system also exposes the Fed to all sorts of pressure to expand or otherwise alter its portfolio for reasons unconnected to monetary policy, as Charles Plosser has eloquently explained. Corridor systems, or "tiered" arrangements that blend features of both corridor and floor arrangements, are also widely favored over strict floor systems among central banks around the world. Finally, the ECB's Ulrich Bindseil, who has written more than anyone else about the relative merits of alternative central bank operating systems, concludes after a recent assessment of them that "best approach to steer [a central bank's policy rate] in normal times…still seems to be the symmetric corridor approach."

Despite these observations, is it still possible that a fair weighing of all the pros and cons might justify the Fed's decision to retain it's floor system? I doubt it, and I've written an entire book explaining why. But what I know for certain is that the merits of the Fed's floor system should be among the main topics of the Fed's ongoing, comprehensive review — informed by outsider input — of its "strategies, tools and communication practices." By suggesting in yesterday's press conference that the Fed has already made up its mind about its operating framework, Chairman Powell appears to have all but struck "tools" from the list of subjects up for discussion. If that's not his intention, I hope he'll say so. And if it is, I hope he'll tell us why.

[Cross-posted from Alt-M.org]

January 31, 2019 10:53AM

Baltimore to Stop Enforcing Laws Against MJ Possession?

Baltimore’s top prosecutor, State’s Attorney Marilyn Mosby, announced on Tuesday that her office will stop pursuing prosecutions against individuals charged with marijuana possession, saying

“We need to get serious about prioritizing what actually makes us safe, and no one who is serious about public safety can honestly say that spending resources to jail people for marijuana use is a smart way to use our limited time and money.”

While this is a positive step forward, resistance remains. The interim police commissioner has promised that, “[Marijuana arrests will continue] unless and until the state legislature changes the applicable laws.”

Despite the protests of marijuana opponents, progress continues. In the past three years, six states have legalized recreational marijuana and thirteen others have legalized the use of medical marijuana and CBD products. Maryland already has a legal system for medical marijuana, and perhaps Ms. Mosby’s stance will push state legislators to act.

Erin Partin co-authored this post.

January 31, 2019 8:36AM

Kamala Harris Admits “Medicare for All” Would Kill Private Health Insurance — but So Would a “Public Option”

Michael Kinsley memorably quipped, “A gaffe is when a politician tells the truth — some obvious truth he isn't supposed to say.” Sen. Kamala Harris (D-CA) recently committed a gaffe when she admitted that Sen. Bernie Sanders’ (I-VT) Medicare for All proposal would oust close to 200 million Americans from their existing health insurance arrangements, a prospect that causes public support for Medicare for All to plummet from 56 percent to 37 percent. Harris thus helpfully illustrated why Sanders’ proposal is, to be kind, so pie-in-the-sky bonkers that it would never pass Congress.

Indeed, the only way Medicare for All could happen is if free-market advocates focus all their fire on that proposal rather than the incremental and thus more politically feasible steps toward a single-payer system that Medicare for All supporters are offering. I am speaking in particular about the various proposals they are offering to create a so-called “public option,” usually by expanding eligibility for Medicare or Medicaid.

In 2009 and 2010, the Left used a public option as a stalking horse for ObamaCare. The Left demanded a public option and lured free-market advocates into focusing their fire on that proposal, only to have congressional Democrats drop the idea and pass ObamaCare as some sort of moderate or compromise measure.

That went so well—or let’s just say, the bill passed—the Left is now using Medicare for All as a new stalking horse for the old stalking horse. Savvy Democrats are hoping that if Sanders whips up the base over Medicare for All, congressional Democrats will be able to pass a public option (e.g., a Medicare/Medicaid “buy-in,” or “Medicare X”) again as some sort of moderate or compromise measure.

A public option is merely a slower and more politically feasible way to achieve the destruction of private health insurance than what Sen. Harris proposes. Supporters say they merely seek a level playing field where a public option may compete with private insurance. Of course, a level playing field between government and private insurers is impossible. It has never happened. It will never happen. It cannot happen.

If you want to know how serious Democrats are about letting private insurance compete with a public option on a level playing field, look at how they are treating a free-market alternative to ObamaCare: short-term, limited duration health insurance. The Obama administration prohibited short-term plans from offering crucial consumer protections; it crippled them by unilaterally decreeing that enrollees in such plans must face medical underwriting more often than federal law requires. Democrats have decried the Trump administration’s decision to allow short-term plans to shield sick enrollees from medical underwriting, and are trying to *rescind* those consumer protections because they are not provided by the government. Senate Democrats voted to kick patients with preexisting conditions out of their short-term plans, leaving those patients to face up to 12 months of expensive medical bills with no insurance coverage whatsoever. Illinois Democrats passed a similar law over Gov. Bruce Rauner’s (R) veto. California Democrats completely banned short-term plans — and thereby gave real teeth to ObamaCare’s 10-month rationing period.

How is any of that a “level playing field”?

Supporters of a public option don’t want open competition. They don’t want to give you just one more choice. They want to destroy private insurance. They want a public option to be your only option. They want you to have no choice.

In the end, a public option is even more dangerous than the Sanders bill. Unlike Sanders’ frontal assault, a public option could actually deliver Medicare for All.

January 30, 2019 5:19PM

The Church of Safe Injection

One major negative of drug prohibition is that it causes riskier ingestion methods.  Prohibition raises drug prices, which encourages injection to get a big bang for the buck.  Prohibition also fosters restrictions on clean syringes, which means users exchange dirty needles, increasing the transmission of HIV and other diseases.

Prohibition also increases overdoses, since potency is difficult to assess in a black market.

Hence the Church of Safe Injection:

Lewiston, Maine: On an 11-degree night here this month, an unconventional mass was held outdoors, next to a 2017 Honda parked on a street corner.

The altar took the form of the small car’s hatchback trunk. The not-so-typical communion: sterile needles, the overdose antidote naloxone, and the rubber tourniquets used prior to drug injection. For shooting and mixing heroin hygienically, alcohol swabs and sterile water. For the cold, hand warmers and socks, and for the hungry, granola bars.

At the center of it all was Jesse Harvey, 26, a Portland-area peer recovery coach who is the founder of the Church of Safe Injection.

The congregation lends structure to a rogue coalition of harm-reduction advocates who work to distribute thousands of syringes — possessing more than 10 is illegal in Maine — as well as hundreds of doses of naloxone. Members of the “church” don’t take that title lightly.

Such organizations are a small but sensible step toward reducing the harm from drug use.  Better still, opiods would be legal, thereby reducing the incentive to inject or share needles and making it easier for users to determine potency.

Until then, however, safe needle exchanges and other harm reduction measures (like Methadone Maintenance) are steps in the right direction.  Cato's Jeffrey Singer makes a compelling case for harm reduction here.  And Cato will host a conference on harm reduction on March 21st in Washington, DC.

 

 

January 30, 2019 11:25AM

Good News on Disability Programs

There is good news for taxpayers regarding federal disability programs. The strong economy and administrative reforms have begun reducing caseloads for the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs. These are huge programs—SSDI cost $144 billion in 2018 while SSI cost $55 billion.

The Wall Street Journal reports the good news here. The themes in the story dovetail with analyses of SSDI and SSI at DownsizingGovernment.org. Tad DeHaven noted that many marginally disabled people who should be working instead decide to go on disability, especially when the economy is poor. DeHaven also called for greater quality control on SSA case decisions to limit benefit awards, and it appears that there have been moves in that direction.

SSDI and SSI still have major problems of bureaucracy, excess utilization, and the disincentivizing of work, but the WSJ story indicates that progress is being made.

Mr. Mort is part of a wave of disabled Americans joining or returning to the U.S. labor force, breaking a long-running trend that had pushed millions to the sidelines of work. These workers have benefited from a tight economy with a very low overall unemployment rate—3.9% in December, just above lowest level since 1969—as employers in many sectors tackle a shortage of available workers by becoming more creative about whom they recruit.

The number of American workers receiving federal disability benefits dropped to 8.5 million in December from a peak of 9 million four years earlier as the share of disabled Americans in the labor force rises. 

… Two factors are at play. First, the tight labor market is causing employers like Gordon Food Service to expand their search for job candidates. Second, Social Security disability benefits—which for many became a de facto second form of unemployment insurance after the last recession ended in 2009—have become harder to access.

When the disability-benefits system found itself on shaky financial footing a few years ago as its rolls swelled, the Social Security Administration pushed new training guidelines to administrative judges who decide which claims will be granted, with the aim of producing more consistent rulings. Before those efforts, judges in some states approved claims at unusually high rates. 

… The share of applying workers whose disability claims were allowed following a medical review in 2016 fell to 48.0%, according to the latest available data from Social Security. That was the first time the rate was below 50% on records dating to 1992. Allowances peaked at 62% in 2001.

… Most people exit the Social Security disability system because they either qualify for retirement benefits or die. 

… But people like Mr. Mort are no longer a rarity. In 2017, according to the latest data available, 51,302 people left disability because they found “gainful” employment. That is the most on records dating to 2002 and nearly 30% higher than in 2011.

… The tighter labor market is delivering opportunities to a broad swath of workers who were disproportionately affected by the last recession. Unemployment has fallen sharply for blacks, Latinos, younger workers and those without a college education.

Media Name: disability.png

More information can be found at the DownsizingGovernment.org page for the Social Security Administration.