Fatal Defects in the Design of DHS' Safe-Harbor Interim Regulatory Flexibility Analysis
29 Apr 2008
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Public comments have been submitted on the Department of Homeland Security (DHS) concerning its Initial Regulatory Flexibility Analysis (IRFA) for the proposed safe-harbor rule. These comments utilized the IRFA to show that aggregate employer costs would likely exceed $1 billion, and that the rule also would generate tens of billions of dollars in social costs from the forced unemployment of authorized workers, who are innocent bystanders to immigration law enforcement. These estimates were premised on the assumption that the IRFA was soundly designed and properly implemented with respect to its choice of models, data, assumptions and analytic methods.
In this comment, the assumption of sound analytic design is shown to be false. The IRFA uses as the domain for the proposed rule about 140,000 Educational Correspondence (“EDCOR”) letters sent to employers by the Social Security Administration (SSA) for TY 2006. Employers with fewer than 10 no-matches with earnings comprising less than 0.5% of payroll are currently exempt from receiving an EDCOR letter as a matter of SSA administrative convenience. However, SSA also sends millions of additional letters annually when they cannot locate a subject employee (about two million letters to about 880,000 employers for TY 2002). Nevertheless, both letters constitute “written notice” as defined by the proposed rule. Failing to adhere to the safe-harbor provisions of the rule after receiving either type of letter may give rise to civil or criminal liability by the inference of constructive knowledge.
By restricting its analysis to the 140,000 employers receiving EDCOR letters and ignoring the million employers receiving two million or more Employer DECOR letters, DHS has assumed away a large fraction of likely employer costs that are cognizable under the Regulatory Flexibility Act. In addition, these assumed-away costs are disproportionately borne by the smallest of small entities – those with less than 10 no-matches whose earnings comprise less than 0.5% of payroll. For TY 2002, the average number of no-matches per employer is 2.2.
By any reasonable standard, this is a fatal design defect in the IRFA. The IRFA presents no justification for ignoring millions of Employer DECOR letters. Rather than address these other letters, the IRFA does not even acknowledge that they exist.
In this comment, the assumption of sound analytic design is shown to be false. The IRFA uses as the domain for the proposed rule about 140,000 Educational Correspondence (“EDCOR”) letters sent to employers by the Social Security Administration (SSA) for TY 2006. Employers with fewer than 10 no-matches with earnings comprising less than 0.5% of payroll are currently exempt from receiving an EDCOR letter as a matter of SSA administrative convenience. However, SSA also sends millions of additional letters annually when they cannot locate a subject employee (about two million letters to about 880,000 employers for TY 2002). Nevertheless, both letters constitute “written notice” as defined by the proposed rule. Failing to adhere to the safe-harbor provisions of the rule after receiving either type of letter may give rise to civil or criminal liability by the inference of constructive knowledge.
By restricting its analysis to the 140,000 employers receiving EDCOR letters and ignoring the million employers receiving two million or more Employer DECOR letters, DHS has assumed away a large fraction of likely employer costs that are cognizable under the Regulatory Flexibility Act. In addition, these assumed-away costs are disproportionately borne by the smallest of small entities – those with less than 10 no-matches whose earnings comprise less than 0.5% of payroll. For TY 2002, the average number of no-matches per employer is 2.2.
By any reasonable standard, this is a fatal design defect in the IRFA. The IRFA presents no justification for ignoring millions of Employer DECOR letters. Rather than address these other letters, the IRFA does not even acknowledge that they exist.