Can Business Solve the Immigration Mess?

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Fuzzy Legislation

What makes business people like Francis so nervous is the severity of the penalties coupled with the uncertainty of the criteria. For example, Arizona wants state employers to use a federal government pilot program that has a 4% error rate for checking Social Security numbers. Francis wonders what would happen if an employee he hired was approved by the federal government under its pilot program, but state investigators later found out that the computers had made a mistake and the worker was illegal. Would he still be penalized?

Alternatively, he could err on the side of turning down Hispanic applicants, but then face discrimination charges. He and others think the law puts them in an untenable position. "Businesses have to walk a tightrope between immigration law and discrimination law," says David Selden, the attorney representing the business groups seeking an injunction against the law.

Napolitano, in an interview, acknowledges that more clarity in the legislation is needed. Some measures in the law "are unclear and need to be made more clear so that everybody knows what the laws are," she says.

Worker Exodus?

Arizona's top employers include Wal-Mart (WMT), Intel (INTC), Raytheon (RTN), Target (TGT), and Wells Fargo (WFC). Still, the challenges of immigration laws fall most heavily on labor-intensive businesses, in industries such as agriculture and construction. Francis, whose family has been in the farming business since the Great Depression, has about 20 full-time employees and ramps up to about 300 during the peak harvest season. His wages are not rock-bottom. He says that his workers make $10 to $15 an hour, well above Arizona's minimum wage of $6.75. But he's skeptical that people will leave office jobs to pick alfalfa and cotton, whatever the pay.

He's hardly alone. Sundt's Pruitt says that even though his workers earn a minimum of $18 an hour with benefits, he thinks it may be difficult to find enough people. "We are not looking for cheap labor," says Pruitt. "I just need skilled craft workers."

One broader concern is that workers will leave the state if they think jobs will be harder to come by because of the new legislation. That could cause an already tight labor market to become tighter. Judith Gains, an economist at Arizona State University, estimates that an exodus of immigrant workers, both legal and illegal, could trim Arizona's workforce by as much as 10%. Arizona Farm Bureau's Rogers warns of a ripple effect through the state's economy. He says that farmers may plant fewer acres if they fear a lack of labor.

Pilot Program

Arizona business owners say they don't want to hire illegal workers but that it's unrealistic to hold them responsible for doing so without a reliable system for determining which workers are legal and which aren't.

The federal government program that the Arizona law would require all local businesses to use is known as the Basic Pilot program. Now voluntary, the program uses Social Security numbers to verify the legal status of workers. While there are ongoing improvements, the program has attracted numerous critics. A congressional audit uncovered the 4% error rate in 2006. And executives from Swift & Co., the third-largest meat processor in the U.S. and a participant in the program since 1997, testified before Congress in April that the program fails to detect duplicate active records in its database and is vulnerable to workers who use stolen documents.

Another major concern is the speed of the pilot system. The program typically responds to verification requests within two or three days. But Pruitt points out that, in the construction business, some workers are only hired for a day or two. He worries that his company will be violating the law while waiting for the results of verification. "I want a foolproof way to know that when I hire someone that they are legal," he says.

For now, businessmen like Pruitt and Francis will have to wait and hope. Their lawsuit is wending its way through the courts and they hope for a preliminary injunction later this year. In the meantime, Francis has put most of his crops in the ground. He hopes that he'll be able to hire enough workers to harvest them in the months ahead. "It's nerve-racking," he says.

For more on U.S. immigration, see BusinessWeek's slide show.

Chang is a reporter for BusinessWeek.