EMPLOYMENT VERIFICATION MANDATES AND THE LABOR MARKET OUTCOMES OF LIKELY UNAUTHORIZED AND NATIVE WORKERS

I. INTRODUCTION Immigration reform efforts in the United States have traditionally targeted illegal immigration. During the past decades, proposals for a comprehensive immigration reform have increasingly addressed both the supply-side as well as the demand-side of the labor market as a means to curb the number of undocumented immigrants in the country. A prominent argument in the immigration debate has been that, if there were no employment opportunities for undocumented workers, workers would no longer attempt to enter into the United States illegally. Although employers are legally liable for hiring unauthorized workers under the Immigration Reform and Control Act of 1986, some consider the Immigration Reform and Control Act (IRCA) to be a failure as the number of unauthorized immigrants grew by roughly 43% between 2000 and 2007.1 For instance, it is believed that the vast majority of the estimated 11.2 million unauthorized immigrants that were in the United States in 2010 came in search of better employment opportunities and, indeed, their labor force attachment appears to far outweigh that of native-born workers.2 As efforts to reform the country's immigration policy were unsuccessful in both 2006 and 2007 and the Dream Act, which would give legal status to illegal immigrants who came to the United States when they were children, was defeated in Congress in 2010, some states have taken matters into their own hands and started to adopt the employment verification (E-Verify) system as a means to curtail the hiring of undocumented workers. According to the Public Policy Institute of California (PPIC), over 118 laws related to the employment of immigrants were enacted in 37 states during the 2005-2010 five-year period (Lof-strom, Bohn, and Raphael 2011). The adoption of the E-Verify system--a federally developed identity and work authorization verification sys-tem--has been a principal feature in these laws. In addition to passing state-level legislation regarding employment, some states and law enforcement agencies have also passed laws allowing state and local police to ask a person suspected of being in the United States illegally to show proof of documented legal status in the country.3 At this point, there is very little statistical evidence regarding the impact of these state-level laws on the potentially unauthorized immigrant population or on native-born workers themselves. In this project, we assess the consequences of state-level E-Verify mandates on the employment and wages of likely unauthorized, naturalized Hispanics. and non-Hispanic natives. We allow for differences by gender and for whether the mandate applies universally to all firms at the state-level or only to the public sector and state contractors. We find that employment verification mandates have a chilling effect on the employment of the group considered most likely to be unauthorized, particularly in the case of universal E-Verify mandates applying to all firms in the state. Additionally, the enactment of such mandates is accompanied by higher hourly wages for likely unauthorized women. These effects point to labor supply reductions that far exceed any decrease in employers' demand for likely unauthorized female labor. In contrast, in the case of likely unauthorized men, reductions in labor supply might seem to be matched with similar cutbacks in employers' demand for their labor, resulting in unaltered wages. None of these effects are observed among naturalized Hispanics. Finally, universal E-Verify mandates appear to slightly raise the employment likelihood of male and female non-Hispanic workers, as well as the hourly wages earned by men. In what follows, we discuss employment verification programs and their expected impacts on the labor market outcomes of likely unauthorized workers, naturalind Hispanic workers and non-Hispanic native workers. We then talk about the data and methodology used in our analysis, to conclude with a detailed discussion of the results and some policy recommendations based on our findings. …