Financial Effects of Illegal Immigration on Maryland
Paul S. Egan On behalf of Federation for American Immigration Reform
Before the Maryland House of Delegates, Economic Matters Committee
March 18, 2004
To Establish a Task Force to Study the Financial Impact of Illegal Immigrants on Maryland’s Job Market (HB 1121)
Mr. Chairman and members of the committee,
FAIR is the largest and oldest organization in the United States dedicated to educating the public on the dangers of massive uncontrolled immigration to the things we hold most dear: our homeland security, economic democracy, a safe and healthy environment for our families, and above all justice for all under the rule of law.
FAIR commends Delegates McDonough, Boteler, Burns, Dwyer, Impallaria, and McMillan for sponsoring this important legislation.
There can be little doubt that illegal immigration is harmful not only to Maryland’s job market, but to the job markets of virtually every state in the nation. Enforcing laws against illegal immigration is primarily a federal responsibility, but states play an essential role in protecting domestic workers and businesses from the abuses caused by unauthorized employment. Some of the legislation considered this year to do just that has unfortunately been set aside or defeated. Under the circumstances, it makes good sense to establish a task force, as this legislation does, to determine the extent of harm the employment of illegal workers is having on Maryland’s job market.
This brief statement will take up some of the most salient issues associated with the growth in and widespread use of unauthorized workers. Each section will then be followed by our recommendations for what the task force contemplated by this legislation should examine.
The Population of Illegal Workers In Maryland is Growing
There are several facts that should reinforce the need for the study authorized by this legislation. Some of this information should counsel a decision to look beyond the damage done to the job market alone and to consider the broader implications of illegal immigration for the state of Maryland.
In January 2003 the former INS, currently the Department of Homeland Security (DHS), estimated the population of illegal aliens in Maryland to be 56,000. This represents an increase of some 10,000 above the INS’ estimate in 1996. A private group, the Migration Policy Institute, issued a study in 2002 that estimated the population of illegal aliens to be over 100,000. According to the former INS there are only 18 states with higher populations of illegal aliens than the state of Maryland.
- The task force should carefully examine the incentives that generate growth in the illegal alien population. Similarly, the task force should examine the disincentives for growth in this population. This type of analysis will be critically necessary in making sound legislative recommendations. For example, the experience of states that have passed laws to issue driver’s licenses, grant in-state tuition benefits, and accept consular identification documents as valid is instructive; these states have become magnets for illegal aliens who will compete with legal workers for employment.
Illegal Aliens Directly Compete With U.S. Citizens and Legal Immigrants for Jobs
By any estimation, the population of illegal aliens in Maryland is large and growing. This means that Maryland resident U.S. citizens and legal immigrants face stiff competition from illegal aliens for many of the same jobs. Illegal aliens are typically low skilled with little formal education. They compete directly for jobs with less skilled or educated American citizens and legal immigrants, as documented in the seminal 1997 study, The New Americans, by the National Academy of Sciences. A growing population of illegal workers will depress wages and working conditions for both legal immigrants and U.S. citizens, who will not be attracted to jobs that pay less than a living wage. Readily available and potentially unlimited numbers of illegal aliens are susceptible to exploitation by employers who will offer less than minimum wages without medical or other benefits.
- To ameliorate the ill effects on legal Maryland workers caused by job market competition, the task force should carefully consider strengthening protections for authorized workers and employers who face competition from employers who rely on cheap illegal labor. Some of these might include the following:
- Provide rights of legal action for American and legal immigrant workers against unauthorized employment abuses, including adverse effects on wages and working conditions.
- Provide businesses using legal workers with administrative and legal remedies to counter competitors who rely on illegal workers as an unfair business practice.
- Consider use of tax policy to reduce the short-term advantages accruing to employers who hire illegal workers.
Casual or Day Labor Workers Pay no Taxes
Many illegal aliens work in the underground economy. There are no good estimates on the numbers of these casual or day labor workers, but there is ample evidence of their growing presence given the increasing demands placed on local jurisdictions to provide taxpayer-subsidized day labor hiring halls.
The presence of this variety of illegal workers should deeply concern Maryland legislators and policymakers. Casual or day labor workers pay no taxes to the state, the U.S., or to the Social Security Trust Fund. If the employers of these workers were forced to hire legal workers instead, it would increase tax payments and decrease social service outlays for unemployed or underemployed American workers and legal immigrants.
While casual or day labor workers may not be exclusively illegal aliens, most of them are likely to be. These illegal aliens should be a source of concern to legislators and policymakers. Legal resident aliens authorized to work in the United States are eligible for assistance from federal and state taxpayer-supported local employment security agency sites (job offices) around the state that are intended to assist individuals in finding work or obtaining unemployment insurance.
In addition, illegal aliens working in regular jobs with false identification may be paying little or no taxes on the basis of claimed family member exemptions. They may even be filing for assistance through the Earned Income Tax Credit (EITC). This is important because if Maryland is like some states, it may be providing additional low-income assistance for individuals who qualify for the EITC.
- The task force should carefully consider the extent of losses to the state in foregone revenues and social services expenditures resulting from the widening use of casual or day labor. The following topics could usefully be examined:
- The extent of the tax loss.
- The extent of expenditures for uncompensated health care for illegal casual or day workers doing jobs with typically higher risk of accidents, but who have no health insurance.
- The amount of other outlays such as education for their children, including special English programs.
- The task force should examine what the state’s employment security agencies could do to attract legally authorized workers to its services. Similarly, the task force should consider discontinuing state and local subsidies for hiring halls that cater to casual or day laborers, many of whom are ineligible to work in the United States.
The Job Categories Most Affected by Illegal Workers
In November 2002, the Social Security Administration’s Inspector General (SSA IG) issued a report on its investigation of the growth in Social Security’s Earnings Suspense File (ESF). This is the account within SSA that credits the tax payments of workers whose social security card numbers (SSNs) appearing on W-2 tax forms do not match the names on file of individuals who have been issued SSNs. The findings of this investigation are significant because they reveal what industries have the greatest numbers of mismatched SSNs and strongly assert that it is the employment of illegal aliens that is causing the growth in the ESF.
The industries in order of greatest mismatches are agriculture, service industries, restaurants/bars, hotels, and retail. The SSA IG study also found that the regions of the country with the greatest numbers of mismatches are the same as those regions of the country with the greatest estimated populations of illegal aliens.
Finally, the SSA IG found that 48 percent of the mismatches involved SSNs that were being used by individuals using a name different from those of the individuals to whom the numbers were issued. Another 11 percent involved mismatches where SSNs that have not been issued were used. This raises the specter of significant fraud and increased risk of widespread identity theft in parts of the country where there is growth in the numbers of illegal workers.
- The task force should consider ways in which the state might usefully coordinate with the Social Security Administration to protect Maryland’s workers from identity theft associated with use of stolen social security numbers. In this regard, the task force might consider ways to encourage employers to more carefully verify the work eligibility of their prospective employees.
The Department of Homeland Security (DHS) is under a mandate from Congress to expand the basic pilot identity verification system this year to states where it has previously been unavailable. This is an electronic verification program available to employers on a voluntary basis. This program should be used to assure that government employees and those of government contractors are legally entitled to work in the United States. Recommendation
- The task force should consider recommending to the state and local governments in Maryland that they enroll in the basic pilot program as soon as it becomes available and require that state contractors and subcontractors do the same.
Mr. Chairman and members of the committee, this concludes my testimony. I look forward to answering any questions you may have.