Labor Market Effects of Worker- and Employer-Targeted Immigration Enforcement

Hiring someone who is not authorized to work in the United States is illegal, and employers who knowingly hire unauthorized immigrant workers may face civil and criminal penalties. The federal government uses a variety of actions, including worksite raids and paperwork audits, to enforce the prohibition on hiring unauthorized workers. Compliance costs and the possibility of becoming the target of an immigration enforcement action may affect U.S. businesses’ decisions about whom to hire as well as how many workers to employ and how much to pay them, but little previous research has studied such potential impacts. We find that increases in worksite enforcement actions in an industry raise employment but reduce the average wage. Enforcement also boosts both hires and separations, so worker turnover rises. Actions that target employers—audits, investigations, fines and criminal charges—have larger effects than raids, which target workers. The results are consistent with businesses shifting to on-the-books or legal workers when immigration enforcement activity increases. However, tougher enforcement does not lead to an increase in business sign-ups in E-Verify or IMAGE, which are two federal government programs that can help businesses determine whether workers are authorized. This suggests that, even in the face of tougher enforcement, employers find it costly to use programs that check workers’ employment eligibility.