NEW YORK (AP) — She could save money, and there’s a goodchance she wouldn’t get caught, but
Consuelo Gomez says she won’t hirepeople who aren’t authorized to work in the U.S. to work for Marty K,her
cleaning and landscaping business.Gomez says she believesthat she’s being undercut by competitors that hire
workers who are inthe U.S. without permission from the government.When potential clientstell her that her
competitors can do the same work for a lot less, itmakes her suspicious."I’ll hear, ‘they’re $2,000
cheaper thanyou,’ and I say, ‘that’s impossible,’" says Gomez, whose business islocated in Bellevue,
Wash. "I can’t fathom how they do it because wewould lose money."If Gomez’s hunch is correct,
she’s dealing witha little talked about problem that a lot of small business owners saymakes survival
difficult. Competing with companies that hire immigrantswho aren’t authorized to work in the U.S. is tough
for a small businessthat follows the law because of the cost. Often, businesses payineligible workers less,
and they also save on taxes.Sixty-eightpercent of business owners surveyed last month by the advocacy
groupSmall Business Majority said too many companies gain an unfair advantageby hiring immigrants who aren’t
eligible to work in the U.S. In 2008,the Pew Research Hispanic Center estimated that 8.3 million people
wereworking in the U.S. without permission. Current estimates put the totalnumber of people in the U.S.
without permission at about 11 million. Theissue is in the forefront now as lawmakers propose ideas to
reform thecountry’s immigration laws."What small businesses want the mostis a level playing field where
they can compete fairly," says JohnArensmeyer, CEO of Small Business Majority. "Unless we fix
theimmigration system, small businesses are going to continue to operate ata disadvantage with companies
that aren’t following the law."Theuse of ineligible workers divides small business owners. Many
don’twant to speak openly about whether or not they hire people who don’thave permission to be in the U.S.
Those who do hire ineligible workersdon’t want to say publicly that they’re breaking the law, or that
theybenefit from paying workers less."Our members have told us thatwhile they follow the rules –
committing time and resources to thehiring process – they remain frustrated with their competition when
theycut corners and don’t adhere to the same rules," said Kate Bonner,manager of House legislative
affairs for the National Federation ofIndependent Business.The number of businesses that hireineligible
workers is hard to pin down, although a study last year bythe Federal Reserve Bank of Atlanta found that 1.6
percent of the365,000 businesses it examined in Georgia had employees who weren’tauthorized to work in the
U.S. It also showed that those employers hadan advantage. Companies that employed people not legally
authorized towork in the U.S. had a 23 percent chance of failing, compared with anaverage for all companies
of 28 percent. The study confirmed whatanecdotal evidence has shown: Businesses get a competitive benefit
fromhiring people who don’t have permission to work in the U.S., says JulieHotchkiss, one of the study’s
three authors."If you employ undocumented workers when your competitors aren’t as well, that gives you
the biggest boost," she says.Thestudy examined records of Social Security numbers at companies to
findworkers who weren’t eligible. Hotchkiss noted that because the studyused company records, it could not
count the number of workers who werepaid off the books — so the total number of companies hiringunauthorized
workers was likely higher.It’s widely believed thatineligible workers earn far less than people who are
eligible to work inthe U.S. That’s not always the case. A 2002 study by researchers atUniversity of Illinois
at Chicago found that the average hourly wageearned by ineligible workers was $7, higher than the minimum
wage of$5.15 at the time. To reach that average amount, many workers had to beearning below $7. But the
competitive advantage that comes with hiringpeople not authorized to work in the U.S. is not just about
salary.Companies also pay Social Security and Medicare taxes on each worker.For example, a company with a
$500,000 annual payroll is required to paymore than $38,000 in federal taxes. States may collect
additionalpayroll taxes from businesses. Soon, many small business owners will berequired to provide
affordable health care insurance, or pay a penalty.If a business is paying a significant number of workers
off the books,it can save it thousands of dollars a year.History shows thatemployers are underpaying workers
who are not authorized to work in theU.S., says Raul Hinojosa-Ojeda, a University of California, Los
Angelesprofessor who has studied the integration of immigrants into the U.S.population. He wrote a 2010
study about the impact of the ImmigrationReform and Control Act of 1986, which gave permanent resident
status to 3million people who were not authorized to be in the U.S. Pay forworkers in that group rose
sharply when their status changed,Hinojosa-Ojeda says."All of a sudden, boom, wages pop up about
18percent and in some states, even higher, and among women, higherbecause they were getting even lower
wages," he says. "It’s thedifference between being below the poverty line and being above it
inmany cases."But paying higher wages to workers who becamepermanent residents didn’t hurt many
businesses, Hinojosa-Ojeda says.Most adjusted, but some of those that were dependent on payingbelow-minimum
wages failed."In Los Angeles we know that 10percent of the garment industry shut down and most of it
moved to Mexico– the only way they could survive paying sweatshop wages is in aforeign country," he
says.A bipartisan Senate bill revealedTuesday could chip away at the issue. But if enacted, some
measureswould take time that many small business owners don’t have to spare. Forinstance, the bill would put
the 11 million immigrants in the countryillegally on a 13-year path to U.S. citizenship and would begin
onlyafter steps have been taken to secure the border, according to anoutline of the measure. Only about half
of new businesses survive forfive years or more, and one-third survive 10 years or more, accordingthe Small
Business Administration.Another proposal in the Senatebill, called the "W” visa would admit 20,000
low-skilled foreignworkers starting in 2015 and could gradually grow up to a cap of 200,000after five years.
The number of visas would fluctuate depending onfactors including unemployment rates, job openings and
employer demand.The existing H-2B visa program for low-wage nonagricultural workers iscapped at 66,000 per
year and applies only to seasonal or temporaryjobs. Business groups that support the W visa idea say that
the numberof workers it’s targeting is too low."That is nothing compared towhat we need," says
Eric Stafford, senior director of governmentaffairs for the Kansas Chamber of Commerce. "There’s a
shortage ofworkers in this country." Some businesses consider using ineligibleworkers not so much
because they want to save money, but because it’shard to find people willing to do jobs that are
unattractive, like beingjanitors or doing other low-skilled work such as harvesting crops orcleaning tables
in restaurants.It’s hard to say whether thedifficulty finding workers or plain old greed drives business
owners tobreak the law. If they get caught, there are hefty penalties. Companiesthat knowingly employ people
not authorized to work in the U.S. facefederal fines of $375 to $16,000 per worker. But studies show that
manycompanies decide it’s worth the risk because they save money. Also, thenumber of convictions of
employers who violate the law is relatively lowwhen compared with other immigration enforcement actions even
thoughthe government is making a bigger effort in this area. U.S. Immigrationand Customs Enforcement
increased audits of worker eligibility to 3,000in 2012 from 250 in fiscal year 2007. In the fiscal year that
endedSept. 30, 2012, the government arrested 240 employers for knowinglyhiring unauthorized workers, and 280
employees were arrested.Thegovernment has removed far greater numbers of people from the U.S. whodon’t have
permission to be in the country and also have criminalrecords, are threats to national security, are repeat
violators ofimmigration law or are court fugitives. According to ICE, it removednearly 400,000 people in
fiscal 2011.About a month before the end offiscal 2012 it had removed more than 366,000 people. In 2007, it
removedroughly 291,000 people.For her part, Gomez, the cleaning andlandscaping service owner, says she won’t
succumb to the pressure tohire workers who aren’t supposed to work in the U.S."I’m going to follow the
law," she says.Copyright 2013 The Associated Press.