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Serious Problems with South Carolina’s E-Verify Mandate

Summary:
E-Verify is a federal government program that allows businesses to check the identities of new hires against federal databases to judge whether they are eligible to legally work in the United States.  The goal of the program is to deny illegal immigrants work in the United States.  E-Verify has serious problems as it misidentifies a small portion of legal workers as illegal immigrants, imposes a serious regulatory burden on employers and employees, increases employee turnover costs, is expensive, stimulates black market document forging and identity theft, might increase crime, and fails in its primary function of turning off the wage magnet.  Despite all of those problems, the best thing about E-Verify is that many employers do not use it in states where it is mandated and workers

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E-Verify is a federal government program that allows businesses to check the identities of new hires against federal databases to judge whether they are eligible to legally work in the United States.  The goal of the program is to deny illegal immigrants work in the United States.  E-Verify has serious problems as it misidentifies a small portion of legal workers as illegal immigrants, imposes a serious regulatory burden on employers and employees, increases employee turnover costs, is expensive, stimulates black market document forging and identity theft, might increase crime, and fails in its primary function of turning off the wage magnet

Despite all of those problems, the best thing about E-Verify is that many employers do not use it in states where it is mandated and workers have many ways to get around the system, reducing the cost of the mandate.  Government data on the number of E-Verify checks that run in each state are sketchy and seem to change with each new FOIA but the most recent one I received from the Department of Homeland Security revealed that my previous work likely overestimated the rates of E-Verify compliance in South Carolina and that there are potentially serious problems there. 

South Carolina mandated E-Verify for all employers in 2011 but delayed the start date until January 1, 2012, because (surprise) the system was more complicated than its proponents claimed and the state government did not want to punish every small employer in the state for noncompliance.  Despite that, proponents of mandatory E-Verify point to South Carolina as a model system because the state Department of Labor, Licensing, and Regulation (DLLR) conducts random audits of employers to guarantee that they use the system for all new hires. 

Early on, South Carolina employers seemed to follow the letter of the E-Verify law to such an extent that they ran about 19 percent more E-Verify checks than there were new hires in seven out of the first 10 quarters that E-Verify was mandated (Figure 1).  In other words, employers ran 119 E-Verify checks for every 100 new hires in the state during that time.  Even including additional quarters before and after that period, possibly because of quarterly lags between when a worker is hired and the E-Verify check occurs, shows that the number of E-Verify checks exceeded the number of new hires by 6 percent over the period from the second quarter of FY2012 through the 4th quarter of FY2014.  

Figure 1
South Carolina E-Verify Compliance
Serious Problems with South Carolina’s E-Verify Mandate

Sources: Department of Homeland Security and Longitudinal Employer-Household Dynamics Survey.

There are a number of potential explanations for why there were more E-Verify checks than there were new hires but they all point to E-Verify’s systematic ineffectiveness.  The first is that employers violated the law by prescreening applicants by running their names through E-Verify prior to hiring them.  The second is that South Carolina employers found the system confusing and had to enter the identity data for the same hire more than once.  The third is that illegal workers who were hired and then were tentatively non-confirmed for employment by E-Verify then submitted another person’s identity data to fulfill the E-Verify mandate, meaning that there were at least two E-Verify checks for that same worker.  The fourth is that South Carolina employers ran many E-Verify checks in order to fool remote auditors into thinking that they were actually complying with the mandate to avoid a more detailed examination by the DLLR.  There are undoubtedly other explanations but those above all show that E-Verify is difficult to use or ineffective. 

E-Verify compliance halved after the third quarter of 2014, dropping from 125 percent of all new hires in that period to 63 percent of all new hires in the second quarter of 2017.  South Carolina is the only state that audits employers and punishes them with extra regulatory burdens if they fail to E-Verify all of their new employees.  Not E-Verifying new employees is only one way by which employers and workers can circumvent the system.  Crucially, the audits do not check whether the employees are actually legally eligible to work.

Worksite immigration enforcement in the form of I-9 audits declines when the local unemployment rate falls.  In South Carolina, E-Verify compliance rates fall when the unemployment rate falls (Figure 2).  Thus, the same political incentives that frustrate worksite enforcement of immigration laws elsewhere combine to limit the effectiveness of South Carolina’s E-Verify mandate.  That is good evidence that a nationwide mandate will not dismantle the systemic political incentives to enforce immigration laws more thoroughly when unemployment rates are high and reduce enforcement when unemployment rates fall, the exact opposite of what is necessary to dim the wage magnet.  

Figure 2
South Carolina E-Verify Compliance and Unemployment Rates
Serious Problems with South Carolina’s E-Verify Mandate

Sources: Bureau of Labor Statistics, Longitudinal Employer-Household Dynamics Survey, and Department of Homeland Security.

South Carolina’s E-Verify mandate has probably not reduced the state’s already low illegal immigrant population and failed to dim the wage and employment magnet that attracted illegal immigrants in the first place.  In exchange, the mandate imposed greater regulatory costs on employers and made the state government appear to be a harsh enforcer of immigration laws.  That is a bad tradeoff for South Carolina.

If the federal government ever mandates E-Verify, it should follow South Carolina’s example of looking tough but ignoring inconsistencies in the system that point to its ineffectiveness.  Regarding E-Verify, the best action for South Carolina and the United States is to drop the charade by canceling the program so Americans can continue to benefit from employing illegal immigrants without E-Verify’s extra regulatory burdens that only help a few South Carolina politicians look tough.  

Alex Nowrasteh
He is an immigration policy analyst at the Cato Institute’s Center for Global Liberty and Prosperity. His popular publications have appeared in the Wall Street Journal, USA Today, the Washington Post, the Houston Chronicle, the Los Angeles Times, the New York Post, and elsewhere. His academic publications have appeared in the Journal of Economic Behavior and Organization, the Fletcher Security Review, and Public Choice.

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