Tuesday, October 23, 2012

Adding Risk to the Hiring Process

One of the surprise twists in last night’s presidential debate was the proposal of a new paperwork program for employers, which would require them to check new hires with a U.S. government database to ensure that workers are legally permitted to work in the country. This adds costs and risks to the hiring process, and it would tend to make businesses in general slightly more reluctant to hire.

It is not such a big worry for large businesses, which could afford to hire one extra worker to specialize in this new regulatory requirement. Yet even this represents an incremental cost to be charged to each department’s budgets whenever they hire a worker. For a small business, though, the new requirement would represent a new skill that someone, most likely the business owner, would have to learn. In the typical small business, that is the kind of task that tends to get postponed until tomorrow or next year — and the hiring along with it. Similarly, the requirement that a business have a web-compatible computer may be a deterrent — not for large businesses, obviously, but for some small businesses, which aren’t based in an office and may need to delay hiring paperwork until the weekend when they can get to a computer.

The greater concern, though, is the added risk of the database check. For most workers, the delay involved is less than half a day. But around 1 percent, incorrectly flagged as illegal immigrants, may have to spend weeks in additional paperwork to appeal the decision against them — a period of time during which they may not be able to start work. This delay is, again, not such a big deal for a large business, but in a small business where every worker really matters it requires a contingency plan for a possible one-month delay in every new hire. This just adds to the fog of contingency thinking that already surrounds every small business.

A more responsible approach would be for the federal government to reverse most of this risk by keeping an accurate database in the first place. But this would require a new government office or agency in Washington with several hundred workers to track down the facts about individual workers’ citizenship and immigration status. One has to be skeptical of the results. The inevitable result of a new round of hiring paperwork, then, would be a slowdown in hiring.

There is a limit to how much the government can turn every employer into its agent to enforce public policy initiatives. I would argue that the U.S. government has already gone well past the economically optimal point; employment regulations already create, on margin, more burdens on employers and employees than policy benefits for the public. When the burden of implementation is taken into account, not every policy a politician can think of can be carried out in the real world. Political leaders have to do better at picking priorities.