Recent Study Reveals E-Verify Shortcomings

Last month, the CATO Institute released a highly critical study on the actual impact E-Verify has had on employers, particularly in the state of Arizona. Is this a warning call to other states considering implementing restrictive E-Verify laws similar to Arizona?

Why the Study Focused on Arizona

Arizona is flanked by two states that have either no E-Verify restrictions (New Mexico) or have officially rescinded its E-Verify restrictions (California). (You can access our interactive E-Verify Legislation Map here for a visual representation.) According to a study released in 2012 compiled by the Department of Homeland Security (DHS) from 2000 and 2010 Census data, Arizona also had the eighth highest concentration of unauthorized residents in the country, with roughly 360,000 residents, down from its height of 560,000 in 2008 (as reported in a previous DHS study). Conditions seemed ripe therefore to laser in on the effects of E-Verify in Arizona, compared to adjacent states, because of the scope of the E-Verify law in Arizona.

Collateral Impact on Multiple Industries

The 2007 Legal Arizona Workers Act (LAWA) required statewide businesses to enroll and use the E-Verify system by January of 2008. The Cato report reveals the wide impact the law has had in multiple industries in the state, including construction, agricultural, and real estate, in addition to rising identify theft crimes. Compared to California, New Mexico and Nevada, these industries in Arizona have suffered significantly not only as a result of the economy, but also, the report claims, from the effects of LAWA. If LAWA’s primary objective was to decrease the unauthorized resident population in the state of Arizona, it had achieved that objective. From 2008-2010, Arizona experienced an estimated 36% population decline, as compared to only a 5.2% decline in California and New Mexico. With the exodus of unauthorized residents (either abroad or to other states), Arizona’s housing market experienced an increase in rental vacancies, which consequently suppressed housing sale prices.

The report goes on to detail more affects in the construction and agricultural industries, where Arizona employers report that the mandatory invocation of E-Verify has ultimately raised their cost of conducting business in the state (at a cost of $147 per employee), preventing them from expanding their operations or hiring more workers. The E-Verify system, according to recent reports, produces a 4.1% inaccuracy rate for workers, 3.3% of those initially found to be unauthorized actually are authorized to work. The cost in money, time and lost productivity ultimately impacts employers. Moreover, there is a disproportionate issuance of TNCs for naturalized U.S. citizens as opposed to natural-born citizens.  The report indicates

E-Verify fails to identify 54% of unauthorized workers, due primarily to employment-based identity-fraud.

Effect of Loopholes and Enforcements Activities

Notwithstanding the legal mandate, some employers are refusing to participate in E-Verify while others are choosing to hire “independent contractors” rather than employees. The report indicates that in 2011, only 67% of business in Arizona complied. For the businesses that have enrolled and used E-Verify to verify employment of its workers, neither are they immune from punishment. One notable example involved Pei Wei restaurants in Arizona. Despite using E-Verify to verify its workforce, the restaurant chain endured immigration worksite raids that resulted in 27 of its employees being arrested. Many more anecdotal examples are provided in the report.

The Prognosis for E-Verify

While the Cato Report reviews policy and its impact, there was little prognosis for the future of E-Verify and how the system could be improved (though this probably fell outside the scope of the report). You can read the full Cato Institute Study by Alex Nowrasteh here.

It is evident from this report and other news stories that improving the accuracy rate of E-Verify is an essential step towards widespread adoption by businesses. Favorable adoption by businesses of the E-Verify will become en masse only when the cost of adoption by employers is outweighed by the benefits. As it stands, and according to a recent internal study conducted by LawLogix, the majority of employers who are not required by law to enroll in E-Verify are taking a wait and see approach, precisely because of costs considerations.

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What are your thoughts on E-Verify? If your organization is enrolled, what’s been your experience with the time, costs and overall inconvenience, if any?