Mandatory E-Verify: Bad for small businesses and the country's bottom line

If you haven’t heard of “E-Verify” before today, you’re probably not alone. It’s an electronic employment verification system, currently used by only 4 percent of employers. But that could change soon, with serious consequences for small businesses.


House Judiciary Committee Chairman Lamar Smith (R-Texas) is advancing a proposal to mandate E-Verify for every employer in the country. That means every business, large and small, would have to run every employee through a federal database to confirm his or her employment status.



It’s ironic that some of the same members of Congress who’ve been beating the drum to roll back “regulations” – mainly, environmental standards that have no negative impact on everyday small businesses and actually produce net benefits to the economy – are now proposing a new regulation that will have a direct impact and direct cost to every small business in the country.

A point of agreement: our immigration system is badly broken, and it’s doing a number on our businesses, our economy, and our country. But what’s the solution? Not mandating E-Verify.


If mandatory E-Verify had been in place in 2010, it would have cost U.S. businesses $2.7 billion to comply, according to Bloomberg Government. Small businesses would bear the bulk of those costs.



And what are the offsetting benefits? None. Unlike those environmental standards that improve public health, prevent lost workdays due to illness and save on health care costs, E-Verify produces no offsetting benefits, only more costs.


For small businesses that don’t have separate HR departments – that’s most of us – the burden of the new system will fall squarely on the owner’s shoulders. That’s time away from focusing on our core business.


E-Verify requires high-speed Internet access. A lot of rural communities, where small businesses are the backbone of the local economy, don’t have it. What are they to do?


Then you’ve got the error rates. Government figures suggest the errors in a mandatory E-Verify system will cause close to 800,000 American workers to lose their jobs incorrectly, and another 3.6 million will have to spend time correcting mistakes. That’s bad for these workers and for their employers, who will lose productive work hours and, in the case of wrongful terminations, lose trained employees.


The error rate problems will be especially acute for employers (and sectors) who have higher proportions of immigrant workers, including naturalized citizens and permanent residents. Permanent residents and naturalized citizens are at least ten times more likely to be wrongly identified as “unauthorized” by E-Verify. Mandating this system will codify discrimination against these workers and their employers.


For the economy overall, mandating E-Verify will drive more activity underground. The Congressional Budget Office has estimated this will reduce federal tax revenues by $17 billion over ten years. At a time when Congress is looking for hundreds of billions in deficit reduction, this policy will only dig the hole deeper.


In short, mandating E-Verify will be bad for small businesses, bad for our workforce, and bad for the country’s bottom line.



We can do better – for our businesses, our economy, and the country’s balance sheet. What we need is comprehensive reform of the immigration system, not expansion of a piecemeal and flawed program like E-Verify that forces small business owners to act as immigration agents and creates new costs for our businesses and for the country.


Comprehensive immigration reform, including a path to citizenship, could shrink the underground economy, realign our immigration system with the needs of businesses, and add $1.5 trillion to the economy over ten years. That’s the kind of policy our businesses and the country need now.

J. Kelly Conklin is the owner of Foley-Waite Associates, a custom woodworking company in Bloomfield, New Jersey. Conklin serves on the Executive Committee of the Main Street Alliance small business network.