The federal government is poised to change the way it deals with immigrants, and those changes will affect your hiring practices – even if you’ve never employed a non-citizen and don’t intend to.
But don’t feel bad if the immigration debate and its plethora of potential implications have left you scratching your head. Like politics, the issue has created some strange bedfellows, along with odd divisions: A Republican president is lining up with Democrats in Congress, and business organizations representing the same types of members are arguing different sides. Take, for example, the Associated General Contractors of America and the U.S. Business and Industry Council. Both groups represent small, family owned businesses, but they are on opposite ends of the spectrum when it comes to immigration policy.
USBIC would like to see fewer immigrant workers in the United States, a scenario it claims would be good for U.S. businesses because it would force them to become more efficient and would bring the law of supply and demand more closely into play. However, AGC wants the government to issue more worker visas so its members can fill positions it says Americans are refusing to take. Both organizations oppose illegal immigrant labor.
To help you understand the logic on both sides of the issue, we spoke to Kelly Knott, director of congressional relations/human resources and labor for AGC, and Alan Tonelson, a research fellow at USBIC. Here’s what they had to say:
According to the Construction Labor Resource Council, which provides construction labor data focusing on the union sector and is supported by nine contractor associations, the construction industry needs 185,000 new workers per year to sustain the current rate of economic growth. Knott maintains, however, the industry isn’t attracting enough American workers and there aren’t enough legal immigrants to fill the gap. “AGC and other groups have education plans, we have outreach, we have so many things to entice people to come into the industry,” she says. “We know this is an industry where good money can be made and good careers established. But too many people have a negative view of construction and consider it a dirty job they don’t want.”
But Tonelson says students steer clear of blue-collar careers not because of a cultural bias, but because they see them as dead-end jobs. He also questions whether a labor shortage in the construction industry even exists. “Generally in a labor shortage, wages would rise,” he says. “But they’re not rising.”
Tonelson recently completed research using U.S. Bureau of Labor Statistics data that showed construction workers’ inflation-adjusted wages peaked in 2003 and fell more than 4 percent between then and February of this year. “If you want to attract more workers, raise wages,” he says. “The presence of illegal immigrants has created options that are more attractive.”
Knott responds by pointing to BLS data as well. Non-supervisory construction workers earned an average of slightly more than $20 per hour in June of this year, 20 percent more than the average for all private industry, non-supervisory workers. “When I hear people say, ‘All you want is cheap labor,’ I say, ‘OK, then explain this number to me,'” she says. (For more on the wage debate, see the sidebar on page 28.)
If contractors think they’ll have a difficult time remaining profitable after they’ve raised wages, Tonelson says they should look to cut costs by adopting more technology, improving their management practices and becoming more productive. And if that doesn’t work, he says they should raise prices. If their services are in demand, customers will pay more. “The whole purpose of capitalism is for prices to be set by demand,” he argues. “If there’s inadequate demand, business shrinks – that’s how the economy evolves in a healthy way.”
But Knott says such an increase in construction costs would likely filter throughout the economy – raising prices for everything from housing to a head of lettuce – and eventually causing it to slow down or stagnate.
AGC has long petitioned for a new worker visa program, and is pinning its hopes on the plan in the Democrat-backed Senate immigration bill (See the sidebar on page 30 for information about the two bills in Congress.). The Senate bill would create a new guest worker program called H2C with a cap of 200,000 visas per year.
Knott says AGC, like most groups advocating comprehensive immigration policy reform, is not asking for a certain number of these visas to go to a specific industry. Construction workers could apply for the H2C visas as well as visas under the current H2B program, which has an annual cap of 66,000 and would remain in effect.
Knott says AGC would like to see a visa program that would be valid long enough to ensure employers don’t lose their training investment. To make this happen, she says legislators should think in terms of the largest construction projects, such as the Woodrow Wilson Bridge near Washington, D.C. “I think at a minimum a visa should be available for six years because you have these massive projects,” Knott says.
Visas under the proposed H2C program would be valid for three years and could be renewed once, for a total of six years. Knott says the only problem AGC has with the Senate’s guest worker program is that it doesn’t have a flexible cap that would be based on market needs.
Tonelson, on the other hand, thinks the U.S. government is already allowing too many people – 900,000 annually through various programs – to immigrate legally, and USBIC has called for the quota to be cut to 500,000.
As a solution to U.S. reliance on immigrant labor, USBIC looks to the Republican-backed House of Representatives’ immigration bill with its emphasis on border security and employer sanctions.
Tonelson adds, however, that turning off the economic magnet that draws illegal immigrants to the United States can’t be done by private businesses alone. “It’s not just jobs, but government services,” he says. “I would argue that nothing except emergency health care should be granted to illegal aliens.” In some states illegal immigrants are granted driver’s licenses and qualify for in-state college tuition. All that has to stop, Tonelson says. While some people argue illegal immigrants are entitled to benefits because they pay taxes, Tonelson says there’s no way to know how much they’re paying, so it should be a basic principle that only legal residents deserve public services.
A more foolproof national identification system is overdue and should be another facet of the long-term solution, Tonelson says. The technology exists to do a better job with verification, “it simply hasn’t been used because of a complete lack of will going back many years over many administrations and many Congresses,” he continues. “They have become captives for the cheap labor lobby. Now the American people are finally speaking up and saying, ‘We are not going to stand for this.’ And the Republican Party seems to be getting the message quicker than the Democratic Party.”
AGC is also in favor of an electronic verification system, and the House and Senate bills have provisions that would put one in place by building upon the now-voluntary Basic Pilot Program, making it mandatory for all employers. (For additional information about the Basic Pilot Program, see “How to keep your company on the right side of the law” article on page 45.) Knott says the I-9 process is cumbersome at best, with employees required to produce two of 29 documents that can be offered as proof of eligibility to work in the United States.
AGC is opposed to the House plan for an electronic verification system because it doesn’t have a phase-in period. The Senate bill calls for the system to be phased in over six years, with larger companies adopting it first. “Any time you start a new program, it’s going to take a little while to get the kinks out of it,” Knott says. “Our problem with the House-passed bill is that employers will pay fines based on what is regurgitated out of the system, and it has a substantial error rate.” If a typo occurs in the application process or if a female employee has recently changed her last name, the system could erroneously report the person is not eligible for employment. But the employer could be fined under the House bill for allowing the person to continue working. Paperwork violations would be $25,000 per incident. The Senate bill provides some time for the discrepancies to be rectified, Knott says.
“There are bad actors out there and they should face repercussions,” she says. “But we need to have a reasonable way of approaching this so people who are trying to do the right thing are not unduly burdened or facing things that make it harder and harder to do business.”
Tonelson says sanctions need to be stepped-up from the current level. The total amount of fines to businesses for failing to check for proper documents from 1999 to 2003 was $212,000, with a $110 fine per violation, he says.
“This is how the federal government has encouraged businesses to use illegal labor,” he continues. Enforcement has gotten tougher in the past couple of years, however, with the Immigration and Customs Enforcement agency making 88 percent more arrests than last year and winning 127 criminal convictions in 2005 compared with 46 in 2004.
An ideal, politically viable bill
Tonelson says the situation in the United States is so out of control that his ideal, politically viable immigration bill would focus on border enforcement. “It would also help turn off the economic magnet,” he says. “It would stop government services from going to people who aren’t in the country legally.”
Knott says while she knows what AGC would like to see, she can’t predict how Congress will act. Overall, the group is promoting the Senate bill, but has objections to some particular stipulations, including language that would make general contractors responsible for the hiring practices of their subcontractors and the lack of a definition of “repeat violator” in a clause that would debar contractors from federal government projects. She says AGC is highlighting these concerns to legislators in the hopes changes will be made in a final bill, should Congress approve one.
“We have a problem and our country needs to address it,” Knott says. “This needs to be done.”
Do undocumented Hispanic workers bring wages down?
The increase in legal immigrants and undocumented workers from Mexico and Central America has put a bright spotlight on this group when it comes to the great wage debate.
For every study that shows a negative effect on wages by undocumented workers, there is another that shows how wages are affected by other factors.
“The recent decline in inflation-adjusted wages dramatically undercuts the claims that certain industries would face crippling labor shortages without substantial inflows of illegal immigrants,” says Steven Capozzola, spokesperson for the U.S. Business and Industry Council. “These industries don’t face shortages of workers. They face shortages of workers willing to work for pitifully low and falling wages.”
The USBIC cites recent U.S. Department of Labor statistics that support this claim. Figures show the hourly wage in 2005 for the average construction worker was $9.87, a penny below the wage in 1965 (adjusted to 1982 dollars). As of February 2006, the figure had dropped to $9.77 per hour. Wages peaked in 2003 at $10.21 per hour which shows they fell 4.31 percent from the peak to February 2006.
Wages in residential construction rose by almost 10 percent from the start of the 1993 housing boom to 2005. From their peak in 2003 to February 2006 however, residential construction worker wages slipped 0.58 percent. For non-residential workers, wages decreased by 1.81 percent from 2000 to February 2006, and specialty trade workers’ wages fell 5.75 percent from 2000 to February 2006.
A May 2004 study by Harvard economics professor George J. Borjas for the Center for Immigration Studies seems to back up those statistics. Borjas concludes that between 1960 and 2000, the immigrant influx “lowered the wages across all job categories for white native workers by 3.5 percent, native-born blacks by 4.5 percent and native-born Hispanics by 5 percent.” It is important to consider however, that in 40 years, the backgrounds of construction workers have become more diversified. Many trades within the industry were once staffed by skilled craftsmen, but workers currently in the industry come from a variety of backgrounds.
A study by the Economic and Business Research Center at the University of Arizona’s Eller College of Management showed that the average hourly construction wages in the Tucson area fell from $29.14 in 1970 to $14.80 in 2005. Arizona had an overall Hispanic population of 28 percent in 2004.
Some, however, feel that blaming immigrants is the easy way out.
“There is very little evidence of downward pressure on working-class wages because of immigration,” says Mark Potok, director of the Southern Poverty Law Center’s Intelligence Report. Angelo Amador, director of Immigration Policy for the U.S. Chamber of Commerce, sees other issues tied to wages.
“People go to both extremes,” Amador says. “People say these are jobs Americans are not willing to do. I think that the truth is there are jobs where there are not enough Americans. We have an unemployment rate of 5 percent. We have an undocumented work force of about 5 percent. So even if you were able to take every single illegal individual in America with a job, and give it to someone on the unemployment rolls, you would still fall short. When you look at the patterns of unemployment in the United States and you look at the pattern of illegal immigration, it follows the U.S. economy.”
There is a bit of an ironic twist to this debate however. The U.S. Department of Labor’s Bureau of Labor Statistics projects growth in the construction industry, partly because of immigration.
According to the Bureau, wage and salary jobs are expected to increase 11 percent through 2014, compared with the 14 percent projected for all industries combined.
A gap too wide to bridge?
Here are the basics of the dueling immigration bills in Congress.
The Senate bill
Border security provisions call for:
- 370 miles of triple-layer fencing at the U.S.-Mexican border.
- 1,000 new border patrol agents and National Guard troops to support them.
- 500 miles of vehicle barriers.
A new guest worker program would:
- Allow 200,000 new temporary guest worker visas per year.
- Provide a separate program for farm laborers.
The plan for illegal immigrants:
- Illegal immigrants could apply for citizenship if they have been in the United States five years or more, can prove they have been employed at least three of those years, pay back taxes and fines of at least $3,250, learn English and have no serious criminal records.
- Those residing in the United States two to five years could enter a temporary worker program, but would eventually have to return to their home countries to obtain green cards.
- Those here illegally less than two years would be ordered home and subject to deportation.
- Increase maximum fines to $20,000 for each illegal worker and impose jail time for repeat offenders.
- Phase in (over six years) adoption of an electronic verification system based on the Basic Pilot Program.
The House of Representatives bill
Border security provisions call for:
- A 700-mile wall at the U.S.-Mexican border; the $2.2 million high-tech structure would feature cameras, sensors and lights.
- A 25-percent increase in the number of canine detection teams.
- Longer mandatory prison terms for illegal immigrant smugglers.
- Require the detention of all illegal immigrants caught along U.S. borders.
The plan for illegal immigrants:
- Charge them with a new felony crime, “unlawful presence.” Currently, being in the United States illegally is a misdemeanor.
- Turn visa overstays into a felony punishable by a year and a day in prison.
- Increase the maximum fine to $40,000 per violation and establish sentences of up to 30 years for repeat offenders.
- All would have to begin using an electronic verification system soon after the legislation is signed into law.
Is NAFTA the problem?
If the U.S. government is going to fully address the immigration dilemma, it needs to take a close look at the nation’s economic relationship with Mexico, says Alan Tonelson, a research fellow at the U.S. Business and Industry Council. The difficulties the United States is facing are symptoms of the failure of the 1994 North American Free Trade Agreement, he says.
“In the early 1990s Bill Clinton said the main reason we needed NAFTA was to turn Mexico into a more productive country – so Mexico would send us goods instead of Mexicans,” Tonelson says.
But China has been the beneficiary of policies meant to help Mexico because the agreement was poorly designed and is ineffectively enforced, he contends.
Chinese companies have been able to send their goods through Mexican ports and then have them trucked across the U.S. border, taking advantage of NAFTA tariff breaks. And with cheap Chinese products flooding the market, Americans are buying them instead of more expensive items from Mexico, where labor costs are higher. Chinese market share in the United States doubled between 2000 and 2004, surpassing Mexico’s share of the market in 2003.
NAFTA and other trade deals the U.S. government is making with South American countries are contributing to the economic magnet that is drawing large numbers of Latinos from floundering economies in their home countries to the prosperity of the United States, Tonelson says. These trade agreements are designed to create greater economic integration between the United States and its neighbors largely by easing the flow of goods. But Tonelson says it makes no sense to integrate markets in capital and goods if not in labor as well. “We’re not letting the markets integrate properly,” he says. “If the world worked like an economics textbook and we really wanted to integrate the North American economy, we would need a single North American labor market with unlimited mobility.”