Comments on DHS’ Safe-Harbor Interim Regulatory Flexibility Analysis
28 Apr 2008
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EXECUTIVE SUMMARY
The Department of Homeland Security (DHS) has published for public comment an Interim Regulatory Flexibility Analysis (IRFA), as required by the Regulatory Flexibility Act, in response to the preliminary injunction issued in AFL-CIO v. Chertoff (D.E. 135, N.D. California, October 10, 2007). The IRFA shows that the proposed rule establishing safe-harbor procedures for employers who receive no-match letters from the Social Security Administration (SSA) will cost U.S. employers approximately $1 billion per year to implement. This is ten times the threshold for an “economically significant” or “major” regulation under Executive Order 12,866 and the Congressional Review Act, respectively. In its 2006 proposed rule, DHS Secretary Chertoff certified that the rule “would not mandate any new burdens on the employer and would not impose any new or additional costs on the employer” and “would not result in an annual effect on the economy of $100 million or more” (71 Fed. Reg. 34284). These certifications were reiterated in the 2007 final rule (72 Fed. Reg. 45623). The IRFA shows that both certifications were false.
The Regulatory Flexibility Act does not require agencies to estimate the effects of proposed regulations on employees, though nothing in the law forbids agencies from doing so if they are interested in ensuring that their legitimate statutory objectives are achieved at minimum social cost. At best, DHS’ analysis adheres to the bare statutory minimum analytic requirement.
Nevertheless, the DHS Safe-Harbor IRFA contains enough information to derive estimates of the social costs the rule imposes on authorized employees – persons who are not targeted by either immigration law or the proposed rule. These costs turn out to be substantial. Across the five scenarios DHS examined, the safe-harbor rule would force between 37,000 and 165,000 authorized employees into potentially permanent unemployment. An illustrative estimate of the social costs of forced unemployment is derived assuming that the value of each such worker’s labor is $25,000 per year and this value is foregone for 15 years. Aggregate social welfare loss to authorized workers would range from $8 billion (assuming 20% of no-matches are authorized workers) to $37 billion (assuming 90% are authorized). These costs would be borne largely by workers least able to navigate multiple state and federal bureaucracies.
The DHS Safe-Harbor IRFA also does not address other unintended but predictable consequences of the safe-harbor rule. For example:
For draft regulatory actions with effects exceeding $1 billion, OMB guidance strongly recommends the preparation of a comprehensive uncertainty analysis. These requirements were established not to burden agencies with process hurdles, but to improve the quality of the major rules they promulgate. The DHS Safe-Harbor IRFA provides sufficient evidence that both a Regulatory Impact Analysis and a comprehensive uncertainty analysis are needed to achieve these good-government objectives that have been in place since 1981.
The Department of Homeland Security (DHS) has published for public comment an Interim Regulatory Flexibility Analysis (IRFA), as required by the Regulatory Flexibility Act, in response to the preliminary injunction issued in AFL-CIO v. Chertoff (D.E. 135, N.D. California, October 10, 2007). The IRFA shows that the proposed rule establishing safe-harbor procedures for employers who receive no-match letters from the Social Security Administration (SSA) will cost U.S. employers approximately $1 billion per year to implement. This is ten times the threshold for an “economically significant” or “major” regulation under Executive Order 12,866 and the Congressional Review Act, respectively. In its 2006 proposed rule, DHS Secretary Chertoff certified that the rule “would not mandate any new burdens on the employer and would not impose any new or additional costs on the employer” and “would not result in an annual effect on the economy of $100 million or more” (71 Fed. Reg. 34284). These certifications were reiterated in the 2007 final rule (72 Fed. Reg. 45623). The IRFA shows that both certifications were false.
The Regulatory Flexibility Act does not require agencies to estimate the effects of proposed regulations on employees, though nothing in the law forbids agencies from doing so if they are interested in ensuring that their legitimate statutory objectives are achieved at minimum social cost. At best, DHS’ analysis adheres to the bare statutory minimum analytic requirement.
Nevertheless, the DHS Safe-Harbor IRFA contains enough information to derive estimates of the social costs the rule imposes on authorized employees – persons who are not targeted by either immigration law or the proposed rule. These costs turn out to be substantial. Across the five scenarios DHS examined, the safe-harbor rule would force between 37,000 and 165,000 authorized employees into potentially permanent unemployment. An illustrative estimate of the social costs of forced unemployment is derived assuming that the value of each such worker’s labor is $25,000 per year and this value is foregone for 15 years. Aggregate social welfare loss to authorized workers would range from $8 billion (assuming 20% of no-matches are authorized workers) to $37 billion (assuming 90% are authorized). These costs would be borne largely by workers least able to navigate multiple state and federal bureaucracies.
The DHS Safe-Harbor IRFA also does not address other unintended but predictable consequences of the safe-harbor rule. For example:
- The rule does not provide a genuine safe harbor from the twin risks of immigration law enforcement and civil liability under federal civil rights law. The IRFA assumes that employers will help employees navigate the federal bureaucracy to correct errors in their records. However, the rule itself strongly discourages employers from providing any help whatsoever unless it is provably identical for all no-match employees when judged after the fact in federal court.The rule provides no safe harbor from unwarranted, frivolous or vexatious private litigation.
- The rule will significantly increase identity theft by making it more valuable (and potentially essential) for unauthorized workers to have names and Social Security Numbers that match. Virtually all of these matched pairs will belong to authorized workers, the vast majority of whom will be citizens and permanent legal residents with Spanish surnames. These workers will face significant new burdens proving to the satisfaction of federal authorities that they are legally permitted to work.Those who are unable to do so will be forced into unemployment.
- The rule will shift some unauthorized workers into independent contracting and the cash (i.e., “underground”) economy, where immigration law enforcement triggered by mismatched names and Social Security Numbers cannot reach them.These workers will face some risk of tax law enforcement by the Internal Revenue Service, but laws protecting the privacy of tax records will shield them from immigration authorities.
- The rule will be followed by more rounds of rulemaking because the number of unauthorized workers submitting mismatched names and Social Security Numbers will decline faster than the number of unauthorized workers seeking employment. DHS has failed to consider how unauthorized workers will adapt to the rule, but adapt they will. DHS will find itself permanently chasing these adaptations with new regulations that impose rising costs on employers and authorized employees.
- The rule will intensify concerns about the privacy and security of personal data stored in government databases, and the potential for these data to be compromised by security lapses or used for inappropriate purposes such as surveillance.
For draft regulatory actions with effects exceeding $1 billion, OMB guidance strongly recommends the preparation of a comprehensive uncertainty analysis. These requirements were established not to burden agencies with process hurdles, but to improve the quality of the major rules they promulgate. The DHS Safe-Harbor IRFA provides sufficient evidence that both a Regulatory Impact Analysis and a comprehensive uncertainty analysis are needed to achieve these good-government objectives that have been in place since 1981.