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.