State Senator Mike Delph’s (R-Carmel) new bill (SB 285) seeks to control illegal immigration by punishing businesses that repeatedly hire them. Based on experience in other states, this proposed new law would do little to deter illegal immigration while imposing big costs on Indiana’s economy.
Sen. Delph’s bill is similar to an immigration law passed in Arizona in 2007 called the Legal Arizona Workers Act (LAWA). Upon passage, then Arizona Governor Janet Napolitano lauded it for including what she called the “business death penalty.” That provision revokes the business licenses of firms who knowingly and repeatedly hire illegal immigrants.
The business death penalty immediately spooked investors and businesses out of the state. A 2012 Cato Institute report found that Arizona’s business death penalty caused a 14.3 percent decline in the start of new businesses in the third quarter of 2007. This, even while the rate of new businesses started in neighboring states actually increased.
States are rightly frustrated with illegal immigration. But business death penalties and harsh laws will only worsen the situation.
In short, dread and uncertainty over the business death penalty hurt the economy. Restaurant entrepreneur Richard Melman halted plans of opening a restaurant in Arizona after LAWA passed, saying: “You put in $3 million or $4 million, and you can be shut down for a mistake. Why take a chance? I want to see how it plays out.”
Luckily for Arizona’s economy, its government largely ignored the business death penalty after its passage. It was only employed three times, two of them on businesses that had already declared bankruptcy. For all of Arizona’s tough-talk about cracking down on illegal immigrants, putting businesses to death for hiring them was too unpopular.
Illegal immigration has dominated Arizona politics for almost a decade, creating and sustaining political careers for years. Yet even there public officials do not have the stomach to enforce a business death penalty. If Arizonans won’t enforce it, Hoosiers definitelywon’t. Delph’s law would scare away some entrepreneurs but not many illegal immigrants.
More specifically, Delph’s proposed legislation offers a proverbial deal with the devil for companies afraid of the business death penalty. If a business uses E-Verify to screen all of its hires then it is legally immune from the death penalty, creating a so-called safe harbor. E-Verify is a federal government-run program that is supposed to check the identities of new hires in order to prevent illegal immigrants from getting a job. The goal of E-Verify is to turn off the so-called “jobs magnet” so that illegal immigrants would not have a reason to come in the first place.
But the E-Verify safe harbor is raw deal for workers, businesses, and those who want stricter enforcement of immigration laws.
One major reason is that it’s a faulty system. E-Verify misidentifies a small percentage of legal Americans as illegal. Many businesses pre-screen applicants through E-Verify so they don’t waste their time and money interviewing people who might not pass. As a result, E-Verify falsely identifies some Americans as illegal immigrants who are never invited for interviews yet don’t know why.
E-Verify hurts businesses by saddling them with another expensive workplace regulation. Although there is no fee for using E-Verify, it comes with a complex 88-page manual that explains legal costs for businesses who comply with the program. As a result of those legal costs, businesses on average bear a $147 cost per E-Verify check.
E-Verify also doesn’t do much to enforce immigration laws. An audit found that E-Verify approves 54 percent of illegal immigrants as legal to work. If an illegal immigrant is being run through E-Verify, a coin toss has a better chance of identifying them.
Arizona, South Carolina, Alabama, and Mississippi require E-Verify for every new hire. The result is that most businesses ignore the E-Verify mandate, more illegal immigrants have fake identifications to thwart it, and it does not turn off the jobs magnet.
States are rightly frustrated with illegal immigration. But business death penalties and harsh laws will only worsen the situation. In Arizona, it hurt entrepreneurs, saddled businesses with expensive regulations, and did little to stop illegal immigration. That’s a bad deal for Indiana.