Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Blog


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
September 1, 2017 10:51AM

Ending DACA Will Impose Billions in Employer Compliance Costs

By David J. Bier

SHARE

President Trump is reportedly considering pulling the plug on the Deferred Action for Childhood Arrivals (DACA) program, which allows about 800,000 immigrants who came to the U.S. as children to live and work here lawfully. If the president does decide to end the program, it will impose a massive cost on employers who currently employ these workers. The cost of recruiting and hiring new employees is expensive. Here are the facts:

  • DACA rescission will cost employers $6.3 billion in employee turnover costs, including recruiting, hiring, and training 720,000 new employees.
  • Every week for the next two years, U.S. employers will have to terminate 6,914 employees who currently participate in DACA at a weekly cost of $61 million.
  • Ending DACA would be the equivalent of 31 “major” regulations.

DACA recipients receive employment authorization documents (EADs). It is not illegal to work without authorization, but it is illegal for employers to hire someone who lacks authorization. Thus, DACA EADs essentially grant permission to employers to hire DACA beneficiaries for a given period—in this case, two years—without fear of employer sanctions for hiring an unauthorized worker. Note that the law prohibits employers from discriminating against foreign-born applicants purely because they have temporary authorization. Thus, if President Trump rescinds DACA, employers are the ones who will have to actually implement the policy by policing their workforce and firing DACA recipients. DACA repeal’s regulatory compliance burden will fall directly on American employers.

To estimate these costs, I reviewed 11 studies of the cost of turnover to employers. These studies included a wide variety of occupations with radically different wage levels. The most important component of turnover cost is the leaving employee’s wage, which is the marginal value of the worker’s production. The Table below displays the cost as a percent of annual wages.

As the Table shows, the estimated turnover cost ranges from 12 percent to 37 percent of annual wages with a median of 25 percent (the average is 26 percent). This estimate is slightly lower than a U.S. Department of Labor estimate that concluded that turnover costs an employer 30 percent of the leaving employee’s salary. It is slightly higher than a 2012 literature survey by Boushey and Glynn (2012) that found a median turnover cost of 21 percent of an employee’s annual salary.

Table: Costs of Turnover in Various Occupations

  Turnover Cost Studies Industries Percent of Annual Wages Average Costs Hourly Wage

1

Seninger, et al (2002) Supported Living

24%


$3,631


$7.56


2

Larson, et al (2004) Direct support professionals

17%


$4,333


$12.45


3

Patterson, et al. (2010) Emergency medical

25%


$7,926


$15.71


4

Hinkin & Tracey (2000) Hotels

29%


$13,104


$15.95


5

Frank (2000) Grocery Stores

31%


$10,848


$17.50


6

Dube, et al (2010) Various

12%


$4,563


$18.55


7

Jones (1990) Nurses

37%


$19,402


$25.94


8

Barnes, et al. (2007) Teachers

36%


$13,446


$30.23


9

Appelbaum & Milkman (2006) Various

25%


$16,461


$32.92


10

Wise (1990) Nurses

31%


$22,557


$36.89


11

Milanowski & Odden (2007) Teachers

17%


$13,969


$41.44

  Median All Above

25%


$13,104


$18.55

Sources: See links in table and table text

An August 2017 Center for American Progress survey of DACA recipients found that their wages had risen to $17.46 hourly (or $34,920 annually). It also found that 91 percent of DACA recipients have jobs. According to my projections based on U.S. Citizenship and Immigration Services data, 790,148 people have DACA or will have DACA by September 1, 2017. Thus, 719,035 immigrants are earning $25.1 billion per year. If the federal government forces employers to fire all of DACA recipients, it will cost employers $6.3 billion.

The fact that some employers will receive advanced notice of the expiration of their employees’ work authorization could mitigate these costs, but according to these studies, the primary cost associated with turnover is the lower productivity of new hires. Additionally, because DACA recipients’ wages have grown 69 percent over the last five years, it is likely that those DACA participants whose cancellations occur in 2018 and 2019 will have higher wages than those today. Finally, DACA participants’ employment rate has also risen year after year—four percentage points since 2016—and older participants have a higher employment rate. This again indicates that the number of firings could be higher than this projection estimates.

The costs will likely not be imposed all at once as the program will slowly unwind over a two-year period. I previously estimated the quarterly rate of expirations, based on U.S. Citizenship and Immigration Services data, which can give us an estimate of how a DACA cancellation would distribute the costs over time. Every week U.S. employers will have to terminate 6,914 DACA employees at a weekly cost of $61 million.

Figure: DACA Employee Terminations and DACA Recession Turnover Costs

 

Media Name: dacarepeal.png

Source: See Table 1 and Cato Institute (Note that 886,000 people have received DACA at some point, but many have had their renewals rejected or have failed to renew for other reasons. 720,000 had jobs in 2017)

For context, the Congressional Review Act regards any new administrative rule as a “major rule” if it will have a likely annual impact of more than $100 million. CRS requires major rules to go through a 60-day notice and public comment period and to allow Congress the opportunity to review it and reject it. Because DACA was not created through a rule-making process, it likely does not require this process to be terminated, but its rescission would still impose $3.2 billion in annual costs. Thus, ending DACA would be the equivalent of more than 30 major regulations.

President Trump is considering DACA rescission only under the threat of a lawsuit that claims DACA was unconstitutionally implemented. If that claim is valid, Congress should immediately act to pass legislation to extend employment authorization and legal status for these young immigrant workers. It should not choose to impose massive costs on employers and immigrants.

Related Tags
International Economics, Development & Immigration

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave, NW,
Washington, DC 20001-5403
(202) 842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org