[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                       FULL COMMITTEE HEARING ON
                        IMMIGRATION POLICIES AND
                     THEIR IMPACT ON SMALL BUSINESS

=======================================================================








                      COMMITTEE ON SMALL BUSINESS
             
                          UNITED STATES HOUSE OF 

                            REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 10, 2007

                               __________

                          Serial Number 110-21

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house












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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


WILLIAM JEFFERSON, Louisiana         STEVE CHABOT, Ohio, Ranking Member
HEATH SHULER, North Carolina         ROSCOE BARTLETT, Maryland
CHARLIE GONZALEZ, Texas              SAM GRAVES, Missouri
RICK LARSEN, Washington              TODD AKIN, Missouri
RAUL GRIJALVA, Arizona               BILL SHUSTER, Pennsylvania
MICHAEL MICHAUD, Maine               MARILYN MUSGRAVE, Colorado
MELISSA BEAN, Illinois               STEVE KING, Iowa
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia
GWEN MOORE, Wisconsin                LOUIE GOHMERT, Texas
JASON ALTMIRE, Pennsylvania          DEAN HELLER, Nevada
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia                JIM JORDAN, Ohio
JOE SESTAK, Pennsylvania

                  Michael Day, Majority Staff Director
                 Adam Minehardt, Deputy Staff Director
                      Tim Slattery, Chief Counsel
               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


WILLIAM JEFFERSON, Louisiana         DAVID DAVIS, Tennessee, Ranking
HENRY CUELLAR, Texas                 ROSCOE BARTLETT, Maryland
GWEN MOORE, Wisconsin                SAM GRAVES, Missouri
YVETTE CLARKE, New York              TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma


                                  (ii)























           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


WILLIAM JEFFERSON, Louisiana         LYNN WESTMORELAND, Georgia, 
RICK LARSEN, Washington              Ranking
DAN LIPINSKI, Illinois               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               STEVE KING, Iowa
GWEN MOORE, Wisconsin                MARILYN MUSGRAVE, Colorado
JASON ALTMIRE, Pennsylvania          MARY FALLIN, Oklahoma
JOE SESTAK, Pennsylvania             VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              LOUIE GOHMERT, Texas, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)



























                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES


PANEL I
Gutierrez, Hon. Luis, Member of Congress.........................     3

PANEL II
Johnson, Benjamin E., American Immigration Law Foundation........    16
Silvertooth, Craig, National Roofing Contractors Association.....    18
Torrey, Maureen, Torrey Farms, Inc...............................    20
Folz, Ralph J., Molecular........................................    22
Rector, Dr. Robert, Heritage Foundation..........................    24
Krikorian, Mark S., Center for Immigration Studies...............    26

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    46
Chabot, Hon. Steve...............................................    48
Altmire, Hon. Jason..............................................    49
Gutierrez, Hon. Luis.............................................    50
Johnson, Benjamin E., American Immigration Law Foundation........    53
Silvertooth, Craig, National Roofing Contractors Association.....    62
Torrey, Maureen, Torrey Farms, Inc...............................    75
Folz, Ralph J., Molecular........................................    77
Rector, Dr. Robert, Heritage Foundation..........................    83
Krikorian, Mark S., Center for Immigration Studies...............   103

Statements for the Record:
Meisinger, Susan R., Society for Human Resource Management.......   110

                                  (v)



 
                  FULL COMITTEE HEARING ON IMMIGRATION
                       POLICIES AND THEIR IMPACT
                           ON SMALL BUSINESS

                              ----------                              


                         THURSDAY, MAY 10, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360 Rayburn House Office Building, Hon. Nydia Velazquez 
[Chairwoman of the Committee] presiding.
    Present: Representatives Velazquez, Jefferson, Cuellar, 
Clarke, Ellsworth, Sestak, Chabot, Westmoreland, and Davis.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    ChairwomanVelazquez. Good morning. I call this hearing on 
immigration policies impacting the small business workforce to 
order.
    Our economy faces many obstacles in fostering small 
business growth, but one of the forgotten challenges has been 
the economic effects of our broken immigration system. Whether 
it is a visa system that doesn't meet industry needs, or a 
verification system that is unworkable, the failures of our 
current immigration policies are weighing down our nation's 26 
million small businesses.
     As we will hear today, immigration plays an enormous role 
in providing that necessary workforce. U.S. small business 
owners are responsible for employing many of the million 
immigrants to fill their workforce needs, and yes, some of 
these 37 million workers are undocumented, many of them 
unbeknownst to their employers. These documented and 
undocumented workers can be found in nearly ever sector of the 
economy. It is clear their services are needed, but with the 
current system it is hindering entrepreneurs ability to grow 
and is creating enormous paperwork burdens.
    As job creation increases at a pace faster than our 
workforce, small businesses will require even more immigrants 
to continue innovate and develop their companies. In the coming 
decades worker shortages are expected to grow across the 
economy and impact sectors that are vital to the health of our 
society. The businesses that produce and harvest our food 
already rely heavily on millions of immigrants. There is a 
critical sector that is here only temporarily to fill seasonal 
needs during harvest time and others that are part of a 
permanent workforce.
    In the high tech industry, H-1B visas provide a pipeline 
for needed highly-skilled workers. However, demand for these 
visas routinely outstrip the limited supply. For proof of this 
shortage, one only has to consider that the application cap for 
H-1B visas was reached this year in only the first few hours of 
the process. The current visa system is clearly not 
accommodating the needs of small businesses. Visa programs are 
not only failing to direct enough workers to the right 
industry, they have also become so bureaucratic that small 
firms cannot compete with larger businesses for those 
employees.
    Large firms are better equipped to navigate the complicated 
system that ask companies to predict their staffing needs 
months in advance and to pay high compliance costs and fees. 
For some industries, it is clear that a temporary workforce is 
an inadequate solution to their labor shortage. Those sectors 
such as the construction and health sectors that need 
additional permanent workers to be successful must also be part 
of the discussion. Small construction companies rely heavily on 
immigrant labor to meet the demand for their services, but the 
industry still faces an inadequate labor supply.
    Although entrepreneurs share national concerns about the 
witnesses of our immigration system, they cannot be its primary 
policing mechanism. Small businesses don't have the resources, 
the technology, and frankly, the responsibility to be that 
first line of defense. Instead, we need a sensible employment 
verification system. It must not place an undue regulatory or 
financial burden on them, nor can it create so much uncertainty 
that small firms will choose not to participate and therefore 
not expand.
    Unfortunately, under this broken system many small 
companies know they are up against competitors who are breaking 
the rules. As the broader immigration debate continues, small 
businesses must have a seat at the table because they face 
unique workforce challenges and make enormous contributions to 
the economy. Small companies need reforms to take into account 
the rate at which they're growing and will address their need 
for short and long-term employees.
    Entrepreneurs are ready to work with a fair and accessible 
system. I look forward to hearing from the witnesses before us 
today about what can we do as the debate over comprehensive 
immigration reform moves forward. We must ensure that willing 
workers are matched with employers who need them to expand 
their businesses, develop their communities and create even 
more jobs.
    I thank all the witnesses for taking time to be here today 
and I yield to Mr. Chabot, for his opening statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr.Chabot. Thank you, Madam Chair, and thank you for 
holding this important hearing on immigration policies and 
their impact on small business, and thanks to our witnesses, 
both on the first and second panels who have joined us or will 
be here later. I'm eager to hear their thoughts and like my 
colleagues, very much appreciate their taking the time from 
their schedules to be here this morning.
    America has an honored tradition of being a melting pot, 
welcoming immigrants from around the world who have come to 
America in search of a better life. Legal immigrants, through 
their hard work and ingenuity, have made important 
contributions to our nation. However, there's a significant 
difference between legal and illegal immigration which is too 
often overlooked. Illegal immigration is by definition against 
the law. Illegal immigration is an issue to be taken very 
seriously. It affects citizenship, our economy, and our 
national security.
    I strongly believe that those who come to the United States 
legally should have every opportunity to work and support their 
families and contribute to our nation as any American citizen 
would. However, those who enter illegally and bypass those who 
have played by the rules and waited their turn, should not be 
afforded the same opportunities as those who follow the law. It 
is also important to ensure that those immigrants who arrive 
here legally, on a temporary basis, return to their home 
countries when their visas expire. America remains the land of 
opportunity. Just as immigrants through the last three 
centuries were willing to give up the lives they knew for 
promises of a better life, there remain many who dream of being 
able to call America home.
    Those who choose to take the legal avenues to come here 
should, of course, be welcomed here, to live and work. Those 
who choose who do so illegally should forfeit that opportunity.
    Welcome again to our witnesses and I think we all look 
forward to hearing their testimony this morning about 
immigration policies and their impact on small business and I 
yield back the balance of my time.
    ChairwomanVelazquez. Thank you, Mr. Chabot, and on the 
first panel I want to welcome our colleague, the Honorable Luis 
Gutierrez from Illinois. He is one of the leaders in this 
Congress regarding immigration reform working on a bipartisan 
basis with another colleague, Mr. Flake. They are the main 
sponsors of the STRIVE Act.
    Mr. Gutierrez, welcome, and you'll have more than five 
minutes to make your presentation. Thank you.

STATEMENT OF LUIS V. GUTIERREZ, A REPRESENTATIVE FROM THE STATE 
                          OF ILLINOIS

    Mr.Gutierrez. Thank you, Chairwoman Velazquez and Ranking 
Member Chabot and Members of the Committee for the invitation.
    I introduced, with Congressman Jeff Flake, the only 
bipartisan comprehensive immigration reform bill in the House 
of Representatives, the STRIVE Act, which provides for a number 
of reforms to our nation's immigration system and would greatly 
benefit small businesses and our economy.
    STRIVE is a comprehensive bill. It proposes enhancing our 
border and interior enforcement efforts, a robust employment 
verification system, a tough and fair earned adjustment for the 
estimated 12 million undocumented individuals in the U.S., a 
new worker program to provide for future flow of workers to 
fill jobs that require little training or skill and for which 
Americans cannot be found, and extensive reforms of the 
employment-based and family-based immigration systems.
    In particular, I believe that earned legalization, new 
worker programs, and visa reforms will provide significant 
relief to small businesses who often struggle under the current 
broken bureaucracy. Together, these provisions will ensure a 
legal workforce well into the future and provide significant 
stability and longevity to small businesses.I would be happy to 
further discussion these important provisions if Members have 
an interest.
    I would like to focus my remarks today on how the nation's 
family immigration system could impact the creation and 
stability of small businesses in the U.S. This connection 
between family immigration and entrepreneurship is not often 
made in the broader immigration debate, but it is an important 
one. We know that families are often the ones who start and own 
new businesses from local hardware stores to restaurants to Mom 
and Pops, family-owned businesses are the backbone of our 
economy.
    We also know that immigrant entrepreneurs are the fastest 
growing segment of small business owners today and they form 
small businesses at a much higher rate than non-immigrant 
Americans. Given the preponderance of immigrant families in the 
community of small business owners, our nation's family 
immigration system could have a significant impact on the state 
of the American small businesses' future job creation and U.S. 
economy.
    Promoting family unit has been a major feature of our 
immigration policy for decades. This does not only promote 
strong family values for our nation, but also provides an 
influx of entrepreneurs who start and grow family businesses 
that generate tax receipts, property ownership, and new jobs 
essential to keeping our cities and neighborhoods strong. 
However, as we know from our constituent casework, the current 
backlog in family visas are causing lengthy waiting times for 
families to immigrate legally to the United States.
    The STRIVE Act addresses these problems in our family-based 
immigration system by significantly increasing the availability 
of family visas to reduce the backlog of visas within six 
years. In the context of the immigration debate, President Bush 
has repeatedly said and I quote, ``family values don't stop at 
the Rio Grande.'' I could not agree with the President more. 
However, I am concerned that his moderate and compassionate 
views are being abandoned in recent Senate negotiations on 
immigration reform. Senators are considering eliminating most 
of the family-based immigration categories and replacing them 
in favor of employment-based system with a point and merit 
system.
    The argument to justify abandoning our nation's historic 
commitment to preserving family values in our immigration 
system is not allowing immigrants to join their U.S. citizen 
brothers and sisters, parents or adult children, is not in the 
national interest. If moral arguments to preserve a robust 
family immigration system do not compel us, the economic facts 
should. It might sound attractive to recruit only the most 
highly skilled and educated to the U.S., but I assure this 
would be not in the national interest. Let me explain why.
    Although the initial earnings of family-based immigrants 
are below those of employment-based immigrants. The earning 
differences dissipate over time. Family immigrants also benefit 
the U.S. economy by starting businesses that would not 
otherwise be developed. And given that immigrants do not come 
in with a focused set of skills for a particular job, they are 
more likely to be flexible to respond to real-time gaps in our 
economy and willing to take a chance to start up new 
businesses. In other words, it is precisely because family-
based immigrants lack specific skills that are able to more 
readily seize upon the opportunities presented by a dynamic 
economy.
    I see no legitimate economic rationale for eliminating 
family immigration categories and the idea is politically 
divisive.
    Having a robust family employment immigration system are 
not mutually exclusive. In fact, the reforms and increases in 
family and employment-based visas in the STRIVE Act allow for 
both. These are essential elements of comprehensive immigration 
reform as they reduce illegal immigration and strengthen our 
economy.
    Thank you, Madam Chair. It's a pleasure to sit here before 
you in this wonderful Committee and I look forward to answering 
all of the questions of the Members of the Committee.
    [The prepared statement of Mr. Gutierrez may be found in 
the Appendix on page 51.]

    ChairwomanVelazquez. Thank you, Mr. Gutierrez, for a great 
presentation. For the work you do in addressing an important 
issue that is impacting every--so many sectors of our economy 
and our society.
    I would like to ask you, Mr. Gutierrez, how different is 
the new record-keeping requirement in the STRIVE Act for 
employers from the current law?
    Mr.Gutierrez. Well, currently, after the 1996 Immigration 
Reform and Control Act, it became illegal to hire someone that 
wasn't legally in the United States with employment ability. So 
the I-9 is simply changed because we're going to use a 
biometric system. That is, when an employee goes before an 
employer, you're going to fill out the form, but we're going to 
use computers. We're going to use the telephone. We're going to 
use electronic equipment in order to verify whether that 
employee is eligible.
    The Department of Homeland Security, Mr. Chertoff, has 
indicated to me and to others that within one year of passing 
any comprehensive immigration reform package here in the House, 
they will be ready at the Department of Homeland Security.
    Now, let me stress that not everybody will be under the 
system immediately. We will first go to critical infrastructure 
in our economy. That's to say our--those who supply our energy, 
nuclear plants, our banking community, large infrastructure, 
employees will be the first ones. It will take about seven 
years to roll out the program. We have to make their 
benchmarks, make sure it's reliable information. But I would 
say to the Chairwoman, it should take one day. The employee, if 
he doesn't get verified gets to continue working at that job 
and still gets hired, but within a 30-day period, because they 
have the ability to appeal a decision in case a decision comes 
back unfavorably, they get the ability to appeal that decision 
and within 30 days everything will be wrapped up.
    But I do want to stress to the Chairwoman, you know, we 
leave a safe harbor for businesses. That is, if you use the 
system, at DHS, to verify the employability of your employee, 
you have a safe harbor and you're held harmless. So there are 
no penalties. We want to go after the employers that knowingly, 
willingly, violate the law and hire undocumented workers by 
putting penalties against them. And I'll end with this. When I 
got a Social Security card, it was the same technology that my 
dad had when he got his Social Security card.
    My daughter is 19. The same technology that I got 40 years 
ago is the same technology and her children. It's time that we 
have a biometric system with readable information through a 
magnetic strip on the back of the card so that we know. And 
once we get that system in place, I would suggest to the 
Chairwoman, you come in with your biometric Social Security 
Card, you can swipe it. It will say much like a credit card, 
approve or disapprove and the federal government will be the 
one holding those records.
    ChairwomanVelazquez. If the Department of Homeland Security 
or Social Security Administration cannot confirm the identify 
of an individual, what is an employer to do?
    Mr.Gutierrez. What the employer to do is number one, he 
employs the person. The employment continues with that 
employee. And that process continues. That employee has 15 days 
to go to the Department of Homeland Security and to get from 
the Department of Homeland Security a correction. Systems make 
mistakes each and every day. Systems, especially large systems 
that are going to have tens of millions of people's information 
and they have 15 days, if at the end of those 15 days it isn't 
corrected, the employee cannot get the job.
    ChairwomanVelazquez. Thank you.
    Mr.Gutierrez. And let me just say at the end, for paper 
purposes, once DHS sends you a verification of employment, 
that's the only piece of paper you have to keep in the file. 
DHS, everything else, you can discard. So a lot less paperwork.
    ChairwomanVelazquez. Mr. Chabot? Thank you, Mr. Gutierrez.

    Mr.Chabot. Thank you very much, Madam Chair. Just a few 
questions and first of all, I want to thank you for your 
testimony. We may not necessarily agree on this issue or really 
a whole lot of issues for that matter, Luis, but I think--and 
probably everybody knows that after this year, the chair, 
you're retiring, and I just wanted to say that it's been a real 
honor to serve with you. I think you've done a commendable and 
incredible job, really, for the people of your District and 
you've worked extremely hard. So thank you very much, and 
please convey our best wishes to the misses as well.
    Mr.Gutierrez. And you do the same to your wife.
    Mr.Chabot. I will certainly.
    Mr.Gutierrez. We look forward to meeting with you outside 
the context of the Congress--both you and your lovely wife.
    Mr.Chabot. Maybe we can agree on something there.Just 
kidding. Thanks, Luis.
    First of all, relative to--there's a lot of us that believe 
that the primary issue initially needs to be security at the 
border. That that needs to be the number one priority. Once 
that is accomplished, then we can deal with the rest of the 
issues. But unless that's dealt with first, we wont' seriously 
deal with that. And the people that are here will stay and 
people will see that they got to stay and we'll have more and 
more come over the border which has never been secured. That's 
the concern that a lot of us have.
    And would you comment on where you believe that security at 
the border comes into the solution to the problem of illegal 
immigration in the country?
    Mr.Gutierrez. When Congressman Flake and I drafted the 
STRIVE Act, if you go to the first section of the STRIVE Act, 
it's border security. Then we went to interior enforcement. I 
mean the first three chapters of our bill are about internal 
enforcement and enforcement procedures. So obviously, as we 
drafted the legislation, we prioritized that for the reading 
and so that people when they looked at it.
    Look, we need to secure our borders. Fences have been 
established, without proper funding to build them. I didn't 
vote. I didn't think you need that, but if you read our 
legislation, I will tell you, Mr. Chabot, we build a virtual 
fence between the United States of America and Mexico, by using 
technology, by putting thousands of new border patrol agents on 
that border.
    But the other thing I think we do, Mr. Chabot, is let's ask 
ourselves who really comes across that border? So we'll just 
deal with the border for one second. People come looking for 
job opportunities and the U.S. Border Patrol says about 90 
percent of the people that they capture are coming here to seek 
a new job, to seek employment opportunities. And about five 
percent of them are coming to be re-unified with family 
members, given the delays in our visa system.
    Then we have another five percent which are alien 
criminals, people with criminal backgrounds. They're not good 
people. So we try to distinguish in our legislation between 
while all immigrants are foreigners, not all foreigners are 
immigrants. Immigrants come seeking job and family 
reunification. Foreigners come here to cause damage and not 
necessarily immigrants.
    Second, and you made this point very well, Mr. Chabot, in 
your testimony, 40 percent of all of those that are here 
illegally in the United States never crossed that border, so 
they came here on temporary visas, student visas, tourist 
visas, H-1B visa. whatever visa they had and there are multiple 
number of visas and then they overstayed their visas.
    So I just want to go quickly back to what I shared with 
Chairwoman Velazquez. That's why we need a biometric system and 
an employment verification system at the federal level, so if I 
come here on a student visa, I overstay it, if I don't have 
that biometric with that swipe on the back, I can't get a job. 
And the other thing, I won't stay because I can't get a job.
    The only way you're going to be able to be employed in the 
United States, ultimately, is by having a biometric card, 
verifiable by the federal government.
    Mr.Chabot. Thank you. In your view, does giving law 
enforcement the authority to voluntarily assist in enforcement 
of our immigration laws, is that helpful? Would you favor that?
    Mr.Gutierrez. Let me tell you what we do in our bill. We 
simply restate what the law is. And we state that look, if 
you're committing a burglary, you should be arrested and 
prosecuted and jailed.
    If you're in an illegal activity, law enforcement should be 
able to go after you regardless of your immigration status, 
based on that action.
    Mr.Chabot. But when you say illegal activity, you would not 
include being here illegally as one of those activities?
    Mr.Gutierrez. Let me suggest to you the following, and this 
is how we look at it. Being here in the United States, not 
under color of law, is a civil violation of our immigration 
system. It's a criminal violation of our system. So we do think 
nothing should happen to them? No. So let me try to make the 
argument this way.
    You're the judge, the American people. You and the American 
people are the judge. What I say on behalf of the undocumented 
is they violated a stipulation of our law, the immigration law. 
And we agree that they did that. Then we say did they violate 
any other law, and if they haven't, if for any other purposes 
they're of good, moral character and never have had interface 
with our legal system and they've been working, they're of good 
moral character, then we say to them, pay a $2,000 fine. Learn 
English. Learn civics. Pay all your back taxes. Work during 
those six years. Do a touch back. That is, leave the country 
and re-entry and re-boot legally, and at the end of six years, 
we're going to take a look at you and see if whether or not you 
should then be eligible for permanent residency. So we let them 
earn, that is here was the violation of the law, here is the 
corresponding punishment.
     In justice, there should be a relationship between the 
punishment and what you did and we think we do that in our 
legislative.
    Mr.Chabot. Madam Chair, I won't ask any more questions, but 
if I could just conclude by stating, although I don't agree 
with many of the parts of this bill, I at least commend you for 
trying to deal with a very challenging issue that we face as a 
nation. And I would just note that the last time the country 
seriously looked at this issue was about 20 years ago. At that 
time we had about two million people here illegally and they 
said--Congress at that time said they were going to do two 
things. One thing, they were finally going to get control of 
our borders, and they were going to allow the people that were 
already here, since there's nothing they could do about it were 
going to give them amnesty. There were about two million people 
here at that time. Well, they didn't get control of the 
borders, never did.
    And we still don't have control of the borders. The people 
stayed and that really sent a message, I think, to a lot of 
other people and now have 12 million people here and I believe 
if we follow that same pattern, that the number 20 years down 
the road or even 10 years down the road will be significantly 
higher than the 12 million people that we have here now, 
illegally, and that's why so many Americans, both Republicans 
and Democrats, are very concerned about this issue, and I yield 
back.
    Mr.Gutierrez. Madam Chair, if I could quickly--I understand 
1986. You're right. 1986 was an amnesty. We will find agreement 
on that. They didn't pay a fine. They didn't go to the back of 
the line. They weren't required to take English classes. They 
weren't required to touch back. They weren't required to go 
back and do all of their income taxes and show they didn't owe 
any income taxes. I mean basically they went straight to the 
front of the line. I understand that flaw in the 1986 
legislation. We address it clearly in the legislation 2007.
    Mr.Chabot. Luis has been around here long enough to know 
that I didn't ask a question. I just made a statement, but he 
got to answer it anyway. So that's why he's so good.
    Mr.Gutierrez. Thank you, Mr. Chabot.
    ChairwomanVelazquez. Mr. Westmoreland.

    Mr.Westmoreland. Thank you, Madam Chair, and I want to 
thank you, too, for all your hard work on this and I think 
we're finally getting somewhere because it is very necessary 
that we take a first step in the direction of solving this 
immigration problem.
    Let me thank you also for putting the language in your bill 
that was in an amendment I had on the last bill that much 
related to the safe harbor. I don't think it's right to 
criminalize employers when they really don't have any document 
verification skills out there and so I think that's great. And 
I also think it's wonderful that we do make a distinction 
between primary contractors and subcontractors and make sure 
that we keep a distinction between those and make sure it's in 
the law that provides for that because as most small 
businessmen and I am a--was a small businessman, you know, you 
have very little control over your subcontractors. And you 
can't be responsible for everything they do. So I commend you 
for doing that. And I think we're taking a great step.
    The one question I had, you mentioned the swipe which I 
very much agree with and it would come back instantly that 
there was a problem. Are you going to have anything in the 
legislation that would hold that employer harmless if there was 
an error in that person being not eligible to be employed?
    Mr.Gutierrez. Absolutely. We have safe harbor provisions 
and if you use the technology and the technology incorrectly 
gives you an approval, remember, you're going to get via--
you're going to be able to go on the Internet. Let's say you 
hire somebody. You're going to be able to go on the Internet, 
press print, and you're going to keep--you're going to have 
something that says Department of Homeland Security says you 
can hire Luis V. Gutierrez, right? And that's the only paper 
you're going to have to keep and you're going to file that. You 
don't have to file it, obviously, you can keep it in your 
computer and as any smart small businessman, you'll probably 
put a floppy disk in there in case the computer falls apart 
later on, and you can retrieve that information.
    But you will get a verification. As long as you use DHS 
verification system, you are held harmless and you have a safe 
harbor against any prosecution or penalties.
    Mr.Westmoreland. Okay, but my question is if it comes back 
and says that the employee is not ready to be hired, does it 
hold the employer harmless from the employee?
    Mr.Gutierrez. Yes.
    Mr.Westmoreland. Okay.
    Mr.Gutierrez. I understand, yes. The employee then has 15 
days under our legislation, 15 days, because quite honestly 
we've all--I mean I've certainly gotten stopped at the airport 
and been asked for extra ID because I'm on some watch list, 
maybe they know more about me than I do. And you know I've been 
delayed, many of us have been delayed, and the government gets 
our names and big government can make big problems for small 
people.
    So they have 15 days in which to clear that up. Everything 
is cleared up within 30 days, so let's say at the end of 30 
days, you are going to get from Homeland Security yes or no. 
After the person appeals. So I come to you, you continue, you 
want me. I have the skills. You continue to hire me. And I have 
15 days to correct it. Within 30 days you will get a final 
determination based on my appeal from them and no, I cannot sue 
you. I can, however, I do have judicial review with the federal 
government and with the bureaucrats at the federal government 
should they be responsible for an action on my employment 
opportunity, but not the employer.
    Mr.Westmoreland. That's good.
    Mr.Gutierrez. The person who runs the system is the one, 
the government.
    Mr.Westmoreland. Because you have to understand from a 
small business perspective that sometimes those first two weeks 
or three weeks are the most expensive part of hiring somebody 
because you're filling out all the paperwork, you're 
introducing them to any 401(k)s or retirement programs that 
you've got; any insurance programs you're trying to them and 
their family enrolled, and I do think the 30-day provision is 
great. I would like to see it be an instant --
    Mr.Gutierrez. It is instant.
    Mr.Westmoreland. But you know, that 15-day period I just, 
and I understand and I think it's a provision that has got to 
be in there. It just does concern me from a small business 
standpoint is that really you have to kind of make a decision 
then where do you want to put the investment in this individual 
to go ahead and hire him, let him be working there for 15 days 
and then have 30 days invested in this employee that you don't 
get any really resolve after 30 days.
    Mr.Gutierrez. Let me suggest one positive thing about the 
program. Because we're talking about small businessmen, they 
will be the last people to be enrolled in the program and we're 
not going to--there's 144 million Americans in our workforce. 
Obviously, we're not going to enroll them all overnight. We're 
going to go to critical infrastructure, the banking industry, 
you know, those industries that are critical to our--and our 
large industries. We're going to do them first. It will take 
about seven years and there are benchmarks during the seven 
years to check the accuracy. We have seven years.
    I'll put it to you this way, we have at least five years 
before we get to the small business people to help fix it, to 
fix it, to mature it, and to redefine it so that it works 
really well. So small business will be the last people entering 
the program. Hopefully, by then we'll have it pretty good. But 
it's critical to our security here in the United States.
    Mr.Westmoreland. Sure.
    Mr.Gutierrez. Because now we're going to know, everybody 
who's hired, we're going to know--and it ends illegal 
immigration. It truly ends it as we know it today.
    ChairwomanVelazquez. The gentleman's time is expired.
    Mr.Westmoreland. Can I do one--
    ChairwomanVelazquez. Will you please be fast?
    Mr.Westmoreland. I will be fast. Let me just say this, and 
I appreciate it taking that long to get to small business, but 
remember, small business probably employs 80 percent of these 
people.
    ChairwomanVelazquez. Mr. Ellsworth.

    Mr.Ellsworth. I'll make mine very fast, Madam Chairwoman. I 
appreciate you having this hearing. Congressman, I don't have 
many questions, just a brief statement that as a newly-elected 
Congressperson, going back and doing my first town halls in 
February and I can remember vividly this is on people's minds, 
the issue of illegal immigration. In fact, one of the gentlemen 
asked me why we hadn't done anything yet about illegal 
immigration. And I probably made the mistake and said well, 
we've only been in there 52 days and he said, he used a couple 
of expletives, he said that's no excuse.
    So we won't try that one now that we've been in four 
months, but there's a--I think we really have to look at the 
practical side. We have illegal immigration laws and we didn't 
do a good job of enforcing those. And I appreciate, 
Congressman, you and all the hard work you're doing to do 
something. I just implore us that when we do things that we do 
them and we enforce what we put on the books and we do 
practical things.
    I was just thinking, Congressman Chabot, your question 
about local law enforcement getting in on the act and as a 
former sheriff and a person who ran a jail, I can tell you that 
almost every jail in this country is suffering from 
overcrowding and probably under federal lawsuits and to wave 
the wand and let us start doing that, if we don't build into 
things what we're going to do after we arrest those people, 
just taking them to our local lockups will not work and the 
local law enforcement will not do it. The sheriffs can't handle 
the load if the rest of the story that goes with that.
    Sometimes it sounds good to say let's let local law 
enforcement and the local law enforcement would, in fact, be 
glad to enforce whatever laws are on the books, but then we 
have to go to the practical side. What are we going to do with 
these people once we put them in our jails, how do we 
adjudicate those, more judges, more prosecutors and more beds 
and it's going to be an awesome responsibility to undertake. 
They would try, but --
    Mr.Chabot. Would the gentleman yield for just a moment?
    Mr.Ellsworth. Absolutely.
    Mr.Chabot. I thank the gentleman for yielding. I was down 
at the border last summer and we were talking to some of the 
folks down there and they were talking about they would pick up 
illegal immigrants and they would basically rather than process 
them, they'd take them back over at night across the Mexican 
border to a town pretty far away from the border and they 
always did it after dark and they'd let them out basically at 
the town square, dozens or sometimes even hundreds and we asked 
them why did they do it at night and they said because they 
didn't want to embarrass the Mexican government is what they 
said. It's a big problem, and obviously, the closer you are to 
the border, the bigger the problem is, but even in your State 
of Indiana and my State of Ohio, it's a real problem that we 
have to face.
    Mr.Ellsworth. It sure is. A lot of discussion. I appreciate 
everybody's efforts in this problem. Thank you, Madam 
Chairwoman, I yield.
    ChairwomanVelazquez. Thank you. Mr. Jefferson? All right, 
Ms. Clark?
    Ms.Clarke. Thank you very much, Madam Chair, and I want to 
thank Congressman Gutierrez for his efforts in this endeavor. I 
think it's a defining moment for our nation quite frankly that 
we approach homeland security in many respects and basically 
the growth and development of this nation in a very humane way.
    I come from New York City which is a gateway for many 
immigrants, many waves of immigrants over many generations and 
certainly we have felt the impact of what I consider quite 
frankly a governmental problem. The infrastructure, the 
bureaucratic infrastructure that should have been in place and 
that needs to be in place today in order to really regulate 
immigration to this nation has faltered.
    And so my question really has to do with the capacity 
building that needs to happen within our own government to 
handle what we found ourselves in terms of a real quandary and 
what we look at going forward. I think to a large extent your 
legislation begins to address that, but I'd like to see the 
nuts and bolts of it really put in place because that is what 
we're going to inherit, the next generation is going to inherit 
as opposed to some of the xenophobic types of reactions that 
I've seen.
    I don't live on the southern border. And so the types of 
reactions that I hear from many of our colleagues, while I'm 
sympathetic to it, I come from a totally different environment 
where the reaction is not quite the same.
    I want to just speak to you at a certain point about the 
whole touch back provision because touch back on the southern 
end is a lot different than touch back on the northern end and 
there are a lot of folks who want to come into compliance with 
what we're talking about it, but touch back for them is a 
challenge because the way that they got here was either as a 
visitor, as you said, or as a foreign student as you've stated, 
and they came here legally usually by airline and not by foot. 
And so just the whole idea well, you can maybe touch back in 
Canada or you can maybe touch back in Mexico, I don't know how 
those governments will feel about other folks from other 
nations touching back or whether they would be in cooperation 
with us regardless of where people come from about the touch 
back provision. I think we need to take another look at that 
and try to fine tune it to a certain degree to address the 
nuances of the variety of immigrants that we have coming to our 
nation or who have come to this nation and are not in 
compliance with our laws.
    I want to thank you once again. Your work has been 
tremendous, tremendous, and I look forward to working closer 
with you in terms of the fine tuning. We've got to deal with 
homeland security. That is a key piece to this. The bureaucracy 
of our federal government has to be dealt with. Thank you, 
Madam Chair.
    ChairwomanVelazquez. Thank you. Your time has expired. Mr. 
Cuellar.

    Mr.Cuellar. Thank you, Madam Chair, and Luis, I want to 
thank you for the work. I know you've been working on this very 
hard and I appreciate that we're looking at comprehensive 
immigration reform in three parts. Being from the border, 
living there, Laredo, understanding what's been happening 
there, living there all my life, I understand exactly what's 
going on, what's legal migration, what's illegal migration.
    We've got to have a strong border security, part of it. I 
know the bill has that. It's very strong and I appreciate that. 
The second part is the guest worker plan or some sort of 
control system to allow people in is important. The system that 
we have now is one, I think it's a good start, but it's not 
working, the HB-A and B and all that. I brought in some folks 
that have gone over the process itself and it's just too 
cumbersome. It's not big enough, in many ways, so the pools 
that we're looking at and I appreciate the work that you're 
doing in that part.
    The third part, which is a difficult part which is what do 
we do about the 11 and 12 million undocumented aliens is a 
difficult part. And keep in mind that about 40 percent of the 
folks that got in across the river, because everybody just 
think they came in across the river, illegally, but about 40 
percent of them came in through a legal permit or visa which 
means that we did not tell them it's time for you to leave and 
this is an important thing. This is why when people start 
talking about building a wall and all that, it really doesn't 
matter because 40 percent of them came over through a legal 
permit, a visa.
    So we've got to be smart on how we do this process and 
certainly one of the things that we have to look at is looking 
at putting the resources not only in homeland security and 
we'll be handling part of this through our committee in 
homeland security, but the other part is working with the State 
Department. Because right now, it's so easy for them to just 
say deny, deny, deny and for the people who are trying to come, 
in a legal way, it has just become very, very difficult.
    So I want to thank you for the work that you've done and I 
appreciate the cooperation that you're showing the Committee 
here.
    Mr.Gutierrez. Congressman, I just want to thank you for 
your help and your assistance being from the border. I think 
you make an excellent voice because I listened to the colloquy 
between my friend, Mr. Chabot, and my friend, Mr. Ellsworth, 
about criminals. The fact is we put 20,000 beds in our 
legislation, 20,000 beds that don't exist today. I mean we're 
smart and we're tough in our legislation and we say prosecute.
    The other thing we do in our legislation so that we 
understand, we order that every person in a jail, every person 
in a jail go through a security check on their immigration 
status. That is every inmate has to go. And if you are not 
legally in the United States, but in a jail, we make it 
seamless, from your point, you don't like get out of jail and 
be released back into society. Our legislation calls for a 
seamless process from that jail cell, whether it's in Texas or 
in Oklahoma or New York, straight to a facility, Department of 
Homeland Security and deported. That doesn't happen today.
    So I would hope that people would look at the enforcement 
capacity that we put in our legislation. We're tough, but we're 
fair and we want a solution to the problem. Thank you so much, 
Mr. Cuellar.
    Mr.Chabot. Would the gentleman yield? Thank you. I'll be 
very brief. The gentleman, I think you're right. They don't all 
just come across the border across the river illegally. Some 
are already here about 40 percent and have overstayed their 
visas. I would just comment relative to that. You had mentioned 
that we don't tell them it's time to go back as if it's the 
government's fault.
    My understanding is the people know that the visa is for a 
certain period of time and they failed to comply with the 
existing law and so they've overstayed their visa so at that 
point, they're illegal. We need, clearly, if they haven't gone 
back, we need to follow up much better than we do now and I 
think that's the point you're making.
    Mr.Cuellar. Yes, I think that is the point and I'm sorry I 
said it that way.
    Mr.Chabot. That's okay.
    Mr.Cuellar. We basically should know when somebody's time 
is over, but then we've got to follow up on that because we 
talk about 11 or 12 million undocumented aliens and 40 percent 
of them overstay their time, that's a serious problem. Let me 
just conclude with this, Madam Chair, just one last point. We 
just got back from Honduras and we got back from Mexico City. 
We've got to work with the Mexicans on securing their southern 
border because if you look at what's happening, you've got so 
many Central Americans and what they call, this is a jargon 
that Border Patrol uses, I don't know it's a PC word, other 
than Mexicans because they classify Mexicans coming in and 
other than Mexicans. Central Americans, other countries are 
coming in through our southern border and other parts of that. 
So we've got to work with other countries on that.
    Thank you.
    ChairwomanVelazquez. Mr. Davis.

    Mr.Davis. Thank you, Madam Chairman. Thank you for your 
testimony.
    Mr.Gutierrez. Thank you, Mr. Davis.
    Mr.Davis. Just looking at the perceptions that are out 
there across America right now, I know there's a perception 
that jobs are being taken from Americans that would like to 
have those jobs. Of course, there's discussions out there that 
Americans won't do the jobs. I actually met with a lady on 
Saturday back in Green County, Tennessee, and she's worked for 
49 years. She lost her job last week and there is a high 
frustration level out there across my District in east 
Tennessee and I think probably across America. People are 
concerned and they take illegal being exactly that, starting 
with that premise, being illegal.
    I know there's a study out there, one of the surveys of 
NFIB, even small business owners that belong to NFIB say that 
70 to 80 percent of the business owners see this as an issue 
that we need to deal with. It's putting the burden on small 
businesses. The small business owners they start jobs to be a 
florist or a healthcare worker or whatever that small business 
is and they didn't really get into the business to be an 
accountant or be a lawyer or have a department to deal with 
human resources. They really just want to go out and do that 
job that they know how to do and create those jobs and grow 
that business.
    What is your thought on--how can we make it easier for 
those businesses to do what they started that small business to 
do? That's the number one thing. And then how can we either 
perception or reality, get to that point where Americans 
understand that either jobs are being taken, number one, we 
need to answer that from--jobs that they would take or number 
two, that that's not reality?
    Mr.Gutierrez. Number one, I think small business people 
need a reliable, simple system to verify the employee and 
that's what we offer. We make it electronic. And if we have a 
biometric Social Security card, if we--you know, the poor small 
businessman, I mean he can use a driver's license. In Illinois, 
our former Governor went to jail for seven driver's licenses 
and there are people manufacturing driver's licenses and false 
Social--he says oh good, this is something I can rely on. He 
swipes it once or he goes on the computer and it says David 
Davis and your photo shows up on the Homeland Security, simple 
system, and then he gets--he sends it on the computer, he sends 
it over the phone to DHS and he gets one simple piece of paper.
    All the rest of the application form and all the other 
verification he can put it away because it said David Davis is 
good to go and he puts that in his file. You need something 
reliable and quick, so you can get it done in one day.
    Secondly, the best way I can answer your question is our 
economy creates about 400,000 low-wage, low-skill jobs a year. 
But we only offer 5,000 visas for low-skill, low-wage workers a 
year. Here's an economy that's exploding in these low-wage, 
low-skill jobs. Does that sometimes go over to other jobs? 
Probably. Can we find anecdotal evidence of this person being 
affected or that person? But in the totality, the immigrants 
obviously buy cars, buy groceries, buy tires, buy clothes, rent 
apartments, contribute to the economy. The Social Security 
Trust Fund has tens of billions of dollars in an unaccountable 
account. They have the money. Don't tell us as Members of 
Congress, we have it, but they can't tell you who that money 
really belongs to or how they're going to get it back to 
someone for the simple reason they were using bad Social 
Security cards and they're not identifiable.
    Lastly, let's look prospectively. You were born between 
1946 and 1964. That makes you a Baby Boomer, makes me a Baby 
Boomer, right? There are 80 million Baby Boomers. In 20 years, 
the youngest Baby Boomer is going to be 81. I mean the oldest 
Baby Boomer will be 81 and the youngest will be 63. Eighty 
million people. I'm not saying all of them will leave the 
workforce because we're living longer, many of them will need 
care, they'll be retired, our Social Security system is going 
to be hurting, but the most important thing, think about those 
tens of millions of people that are going to be leaving the 
workforce.
    At current rates, of birth rates here in the United States, 
in the next 20 years, we will increase about 13 million people, 
given current birth rates. Who is going to take over the jobs 
of the tens of millions of people in the Baby Boomers as they 
retire?
    We're going to have to grapple with this issue, so we want 
to do it strong and effectively and securely and we want to 
make sure that people have a legal document to come here 
because it's good for our economy too.
    Mr.Davis. If your legislation were to pass, when would this 
swipe card actually go into effect? How long are we talking 
about?
    Mr.Gutierrez. Much of it, the critical infrastructure would 
happen rather quickly within the first to second year. But the 
first--the other thing we do is we say until we get to that 
biometric system, we say that you must have a driver's license 
to get a job under the Real ID Act, a driver's license or we 
say you have to bring your passport which is biometric and has 
a swipe. So we limit the numbers immediately of kinds of 
identification that an employer can use.
    ChairwomanVelazquez. Time has expired. And we're going to 
have a set of votes, so the Committee is in recess subject to 
the call of the chair. I believe that we will be back here 
around 11:30.
    Mr.Gutierrez. Thank you, you've been very generous.
    ChairwomanVelazquez. Thank you, sir, for your presentation.
    [Off the record.]
    ChairwomanVelazquez. The Committee will reconvene. I will 
ask the witnesses of the second panel to take your seats.
    We are going to start our second panel, and our first 
witness is Mr. Benjamin Johnson. He is the Executive Director 
of the American Immigration Law Foundation and has written 
extensively on immigration law and policy. The Foundation is 
dedicated to increasing public understanding of immigration law 
and policy and the value of immigration to American society.
    Mr. Johnson, you will be given five minutes to make your 
presentation. You could either summarize it--and without 
objection your whole testimony will be entered into the record.

   STATEMENT OF MR. BENJAMIN E. JOHNSON, DIRECTOR, AMERICAN 
                   IMMIGRATION LAW FOUNDATION

    Mr.Johnson. Thank you very much, Madam Chair, and members 
of the Committee for this opportunity to talk about the impact 
of U.S. immigration policies on small businesses in this 
country. Rather than trying to tackle all of the complex issues 
that we have heard about today, I am going to focus my comments 
on the economic and demographic realities that are making 
immigration an important issue for hundreds of thousands of 
small businesses around the country.
    In the debate about the economics of immigration, I often 
hear people recite the one lesson we all seem to have learned 
from Economics 101, which is that it is all about supply and 
demand. But after reciting this axiom, the conversation is 
almost always focused exclusively on the issue of supply. The 
argument I hear most often is that millions of immigrants are 
coming to the U.S. for jobs, and that the arrival of all these 
workers must be driving down wages and opportunities, because 
everyone knows that if you have a large supply of something 
then its value must go down.
    But you don't have to look much further than your morning 
cup of coffee to find evidence that just because there is a 
large supply of something isn't a guarantee that its value is 
going to go down. Coffee shops seem to be everywhere, on street 
corners across America, and yet people line up out the door 
waiting to pay more than they have ever paid for coffee.
    And the reason is that the demand for coffee has kept pace 
with the supply. These stores aren't just competing for a fixed 
number of customers; they are expanding the customer base by 
creating more and more coffee drinkers. The lesson here is that 
we have to look at both supply and demand. Demand matters.
    When it comes to immigration, we cannot focus only on the 
numbers that are coming. We have to look at what kind of demand 
is being created by our economy. I think that the evidence 
strongly suggests that the--strongly supports the conclusion 
that immigrants are drawn to our labor force because of 
legitimate demands being created by our incredibly diverse and 
dynamic economy.
    In 2006, the net supply of immigrants into our workforce, 
both legal and undocumented, was approximately 700,000 workers. 
But when we look at demand, we find that in 2006 our economy 
created 2.2 million new jobs. To put that in perspective, that 
is more new jobs than were created by all of the European Union 
and Japan combined. And those numbers reflect what almost 
everyone agrees is a jobless recovery.
    Evidence that immigration is a response to legitimate 
demand can also be seen in the types of immigrants that we 
attract. A majority of the new jobs in the last 10 or 15 years 
have been in occupations at the extremes of the skill spectrum. 
The highest growth rates have been in occupations that require 
high levels of education, jobs like engineers, doctors, 
geologists.
    But in terms of sheer numbers, the vast majority of jobs 
have been created in occupations that require very little 
education, jobs like home health aides, landscapers, 
construction helpers. And it turns out that in fact the 
immigrants that are coming to the United States have skills 
that match our demand. Most immigrants coming into the United 
States either have very little education or very high levels of 
education. That is happening because the majority of U.S. 
workers are right in the middle of the skill spectrum, not at 
the two extremes.
    The result is that immigrants complement rather than 
compete with the vast majority of U.S. workers. In other words, 
immigrants are coming here to fill gaps in our labor market.
    There has been a lot of controversy about immigrants coming 
here to do jobs that Americans are less interested in. But the 
truth is: it is not an insult to the American worker that the 
number of people who are looking for jobs that require very 
little education or training is getting smaller.
    Our labor markets attract younger, less educated 
immigrants, because our labor force is getting older and it is 
getting better educated. In the early 1960s, somewhere around 
half of U.S. workers were high school dropouts. Today, on about 
12 percent of U.S. workers are high school dropouts. We should 
be proud of this fact.
    But this success means that we have fewer workers who are 
looking for jobs that require no education or training. And we 
shouldn't be surprised that employers are doing what they have 
always done for the last 200 years, which is turning to 
immigration to fill the gaps in our labor force. In fact, the 
ability to use immigration to supplement and fill gaps in our 
labor force across the skill spectrum is one of the principal 
reasons the United States has been able to create the most 
diverse, most dynamic, most flexible workforce the world has 
ever seen.
    Unfortunately, for the growing number of immigrant workers 
and small businesses that turn to the immigration system for 
help, dealing with the economic and labor force challenges they 
face, the current system has failed them. The harsh reality is 
that the current environment is one where a growing share of 
the workforce is foreign-born, where large numbers of those 
workers are undocumented, where there is no effective way to 
discern which workers are legal and which ones are not, where 
there is an increasing threat of immigration raids, and where 
the legal system of immigration offers very few options to the 
industries where immigrant workers are most often employed.
     In this environment, small businesses are at serious risk. 
Small companies are the least able to overcome the loss of a 
large share of their workforce due to raids, or the inability 
to pursue some innovative idea that requires a skill set not 
readily available in our workforce. Small businesses are the 
least likely to be able to afford or endure the delays and 
bureaucracy that have come to define our immigration system.
    Given the fact that the majority of workers in the United 
States are employed by small- and medium-sized companies, and 
that the health and vitality of our economy has always relied 
on the success of small businesses, we cannot afford to put 
these companies or their employees at risk because of our 
dysfunctional immigration system. Congress must act to reform 
all aspects of our laws, so that we can have an orderly, 
regulated flow of workers that fits the legitimate demands of 
our economy.
    Thank you.
    [The prepared statement of Mr. Johnson may be found in the 
Appendix on page 54.]

    ChairwomanVelazquez. Thank you, Mr. Johnson.
    Our next speaker or witness is Mr. Craig Silvertooth. He is 
the Director of Federal Affairs of the National Roofing 
Contractors Association. NRCA is an active organization of 
members who share a common purpose and interest to further 
promote the art of roofing application through continual 
education, professionalism, and adherence to the highest 
standards.
    Thank you. Welcome.

    STATEMENT OF MR. CRAIG SILVERTOOTH, DIRECTOR OF FEDERAL 
       AFFAIRS, NATIONAL ROOFING CONTRACTORS ASSOCIATION

    Mr.Silvertooth. Thank you, Madam Chair. I appreciate it, 
and I appreciate you entering my prepared testimony into the 
record as well. Members of the Committee, thank you as well.
    I am testifying here today on behalf of the National 
Roofing Contractors Association, but I am also testifying here 
today on behalf of the Essential Worker Immigration Coalition, 
which is a coalition of businesses spanning the spectrum of 
American industry. I serve as a co-chair of that coalition as 
well, and I would like to speak today about the intersection of 
the small business community and our nation's current 
immigration laws and how those might be changed in the coming 
year, if we see successful immigration reform in this Congress.
    My comments will break down broadly into four areas. First, 
the demographic challenges we face; secondly, our current 
system, focusing specifically on two initiatives by the 
Department of Homeland Security's Immigration and Customs 
Enforcement Division; then, I would like to talk about concerns 
with certain proposals that are currently under consideration; 
and, finally, our belief as to what a workable immigration 
system would look like, particularly from the small business 
community's perspective.
    I understand that I have time constraints, so I will try to 
be brief and touch just broadly on these topics. NRCA and 
EWIC's members come to the table just like every other 
business, frankly, in this country to the immigration debate, 
from the perspective of meeting our workforce needs. Ben 
touched upon what we are facing from the demographic 
standpoint. I would like to focus on two industries in 
particular. There are two of the largest private sector 
employers in our economy--that is, the construction industry 
and the roofing industry--or the restaurant industry.
    Regarding the construction industry, this is what we are 
seeing in the industry today. There was data released by the 
Pugh Hispanic Center on March 7 of this year. They found that 
construction employed 2.9 million Hispanic workers in 2006. 
Total employment for the construction industry is 11.8, so 
fully one-quarter of every employee in the construction 
industry is of Latino or Hispanic origin.
    2.2 million of the Hispanics in the industry were foreign-
born, and a staggering number of those were recent arrivals, 
meaning that they came from--they have arrived in the country 
since the year 2000. That is important to bear in mind, because 
you need to keep in mind that this country only allows 5,000 
green cards per year of essential worker visas, and that 
translates into a waiting list of about 10 to 12 years. And, 
frankly, the number would be a lot higher if employers decided 
to take advantage of that program.
    Then, we also have the H-2B program. That is a seasonal 
visa, and that only allows for 66,000 a year. It is capped at 
that level.
    In 2006, the construction industry employed a total of 
559,000 new workers, and of that number 372,000 were of Latino 
origin. That translates into 66.5 percent of all new hires in 
the industry last year were of Latino origin. About 60 percent 
of the increase in industry employment, or 335,000, were 
foreign-born Hispanics. And 255,000 of the total increase, or 
45 percent, arrived in the country since the year 2000.
    In total, nearly one-third of all recently-arrived foreign-
born Hispanics worked in the construction industry in 2006. So 
clearly our industry is a big draw.
    Regarding the restaurant industry, we are seeing that the 
restaurant industry is going to need an additional 15 percent 
of its workforce. They currently employ 13 million immigrants, 
foreign-born, or they currently employ 13 million workers in 
total, but we know that they are going to need an additional 
two million over the next 10 years.
    I see I am running a little short on time, so I am going to 
skip over to what we are facing in the current system from the 
small business perspective. There are two initiatives underway. 
One is what is called a Social Security No Match proposal that 
has been issued by the Department of Security's Immigration and 
Customs Enforcement Division, came out last August. They are 
signaling that they would like to prosecute employers for 
continuing to employ workers that have been the subject of a 
Social Security No Match letter. The second issue is this 
ramped up enforcement of immigration and customs enforcement 
that we are seeing across the nation.
    I want to be very clear: our members are supportive of 
adhering to immigration laws. They do their best to adhere to 
them, but the system is broken. It is difficult, it is unwieldy 
to manage, and what they are finding is that they are grappling 
with a system where the rules are unclear. A good example is 
this. If somebody comes through your front door and they 
issue--they give you a form of identification, it might be one 
of 27 different forms, because currently that is what the law 
says that an employer has to accept.
    If the person looks like they may not be a native-born 
worker, you are not allowed to challenge them, and that is 
probably a good thing. I think that would run afoul of what 
this country is about. But it would violate employment 
discrimination laws.
    Under the proposal that we are considering now, an employer 
would be held liable in the future even though they would be 
prevented from asking these types of questions due to anti-
discrimination statutes that we have on the books. And so you 
would have a drastic increase of what we see going on in the 
workplace in terms of raids by ICE and them coming through the 
front door, but you are not allowed to really question and 
investigate whether or not your workforce is legal.
    I see my time is up, and I will be happy to answer any 
questions.
    [The prepared statement of Mr. Silvertooth may be found in 
the Appendix on page 63.]

    ChairwomanVelazquez. Sure. During the time for question and 
answers, I am sure that you will be able to share with us or 
express any other ideas or comments that you may have.
    Our next witness is Ms. Maureen Torrey. She is the Vice 
President of Torrey Farms, Inc., family-owned in Elba, New 
York. The Torrey family has farmed in upstate New York for 11 
generations, where Ms. Torrey oversees marketing and business 
management for her family's 10,000-acre farm.
    Welcome, and thank you for being here.

STATEMENT OF MS. MAUREEN TORREY, TORREY FARMS, INC., ELBA, NEW 
                              YORK

    Ms.Torrey. Thank you, Madam Chairwoman, and members of the 
Committee, for the opportunity to testify before you today 
regarding the impact of immigration reform on America's small 
business community, and specifically agricultural producers.
    My testimony reflects my own experience as a life-long 
farmer. I am also testifying on behalf of Agriculture Coalition 
for Immigration Reform, the National Council of Agricultural 
Employers, and the United Fresh Produce Association. ACIR is a 
broad national coalition of agricultural groups working to pass 
meaningful immigration reform. And I just concluded my term as 
Chairman of United this past week.
    My family and I farm vegetables and dairy in western New 
York. Our farm is now being run by the eleventh generation and 
the twelfth is on the way, if we are able to sustain the 
business. However, the lack of farm labor, the lack of a 
workable agricultural labor program, and immigration 
enforcement without a complete solution constitutes an 
immediate and absolute threat to the survival of farms like 
mine across the country.
    Some years ago, American farm families provided much of the 
needed farm labor, and local communities turned out extra 
workers for peak harvest needs. Times have changed. America's 
labor-intense farming operations are now sustained by immigrant 
labor. This is true of fruit, vegetable, farms, dairies, 
ranches, nurseries, greenhouses, and Christmas tree farms.
    Federal Government data shows that the majority of farm 
workers lack proper work authorization and immigration status. 
The U.S. Department of Labor's National Agricultural Workers 
Survey, or NAWS, reports that 78 percent of seasonal 
agricultural workers are foreign-born. There are about 1.6 
million farm workers who perform 25 or more days of hired farm 
work during the year. NAWS reported in 1998 that 52 percent of 
farm workers lacked legal status. Experts suggest that 
percentage now exceeds 70 percent.
    This phenomenon is national in scope, not just a California 
and border state problem. Data for the eastern half of the U.S. 
presented by Dr. Dan Carroll of the DOL revealed that an 
astonishing 99 percent of new labor force entrants into the 
agricultural workforce in the eastern states in 1998 through 
'99 were not authorized to work in the United States.
    These statistics reveal what we already knew. Americans are 
not raising their children to be farm workers. Domestic workers 
rarely apply for farm jobs. And in the absence of a reliable 
agricultural worker program, our industries will rely on 
workers who present work authorization documents that appear, 
but in fact are not legitimate. This unstable situation 
threatens small business survival and economic prosperity, 
especially in our rural communities.
    My own story underscores how broken the system is. Since 
1981, Torrey Farms has cooperated with the New York State 
Department of Labor to recruit farm workers for our operation. 
No one is hired in any position, whether college educated or 
cut cabbage or milk cows without a referral from the New York 
State Department of Labor.
    The Department verifies the work eligibility of the 
applicants in the same manner as most employers. It looks at 
all the allowable forms of identification specified on the I-9 
form, yet we know the high incident of false documents. We were 
starkly reminded of that fact last October when agents of the 
Department of Homeland Security's Immigration and Custom 
Enforcement showed up at one of our farms.
    The agents kicked in the door at one of our housing 
facilities and proceeded to round up 34 workers at 6:00 a.m. in 
the morning who had been referred by the State Department of 
Labor. Referrals from the State Department of Labor to our 
farms have been apprehended on more than one occasion. Put 
simply, one arm of government recruits and refers our workforce 
and another arm of government takes away.
    It is a crying shame that our great nation has failed to 
implement a rational legal system. If we do not see a solution 
soon, much of our food production will move out of the country. 
It will move to areas where labor is available--Canada, Mexico, 
South America, China.
    We are the largest employer in our town and among the 
largest in our county. We have a $10 million payroll amongst 
all our entities. This brings back over $70 million in our 
community. That does not include all the work that we do with 
suppliers and other small businesses.
    I just need to touch on the needed solutions. First, we 
need a reliable and affordable guest worker program. Second, we 
need an opportunity for trained, experienced, and otherwise 
law-abiding farm workers to have the chance to continue working 
and to earn the right to become permanent legal residents of 
the U.S. subject to strict conditions.
    Growers and producers are conservative by nature. We work 
hard, we pay our taxes, we care deeply about the security and 
the future of our country. We care about the rule of the land. 
We urge Congress to finally get the job done this year. We are 
in a crisis.
    Thank you.
    [The prepared statement of Ms. Torrey may be found in the 
Appendix on page 76.]

    ChairwomanVelazquez. Thank you, Ms. Torrey.
    Our next witness is Mr. Ralph Folz, CEO of Molecular. He 
has been responsible for building this company into one of the 
fastest-growing Internet professional services firms in the 
United States. Prior to founding Molecular, Mr. Folz served as 
an advisor of strategies and consultant to several of New 
England's largest technology companies.
    Welcome, and you have five minutes.

  STATEMENT OF MR. RALPH J. FOLZ, CEO, MOLECULAR, WATERTOWN, 
                         MASSACHUSETTS

    Mr.Folz. Thank you. Madam Chairwoman, members of the 
Committee, thank you for the opportunity to testify today. I am 
Ralph Folz. I am the CEO of Molecular. We are an Internet 
consulting company with 140 employees located in Boston, 
Massachusetts. We help large firms such as Reebok and Coke and 
Fidelity Investments build Internet sites to reach and service 
their customers.
    I testify today on behalf of Molecular and as a member of 
the Technology Network, or TechNet. We are a network of CEOs 
and senior executives of companies that are leading innovators 
in the fields of IT, Internet, e-commerce, biotechnology, 
venture capital, and investment banking. TechNet membership is 
diverse. Some of us are leaders of the world's largest and 
best-known technology companies, and other of us are just 
starting out with small firms with promising innovations that 
have enormous potential.
    We are all entrepreneurs. We believe in the free market and 
the power of ideas. We have turned innovation into high-paying 
jobs, more than a million nationwide. TechNet's top priority is 
to shape public policy impacting U.S. innovation and technology 
leadership.
    Recently, TechNet CEOs worked with Speaker Nancy Pelosi and 
others in the development of the innovation agenda, a 
comprehensive set of public policies designed to spur continued 
growth and expansion of our innovation economy. It is a great 
pleasure today to testify before Chairwoman Velazquez, who has 
been a long-standing leaders in the policies that encouraged 
the creation of growth of small business, truly the backbone of 
this nation's economy.
    I am very passionate about entrepreneurial ventures. I 
started Molecular 13 years ago with a co-founder, an idea, and 
$2,000 each. And we have been able to turn that into a $25 
million company generating many high-paying jobs along the way.
    Ensuring that we continue to attract and retain the 
brightest, most talented people from around the world, who can 
contribute to our U.S. innovation leadership, is fundamental to 
supporting our global competitiveness. Highly skilled 
immigration reform is essential to our nation's continued 
economic prosperity. Perhaps for the first time in more than 
half a century the future is truly up for grabs.
    Unlike the industrial revolution, today's innovation 
economy is global. China, India, Russia, and other nations are 
investing in emerging technologies and industries to seize a 
competitive advantage in the industries and the markets of the 
future. The number of engineering degrees awarded in the U.S. 
is down 20 percent from the peak in 1985.
    Only 17 percent of U.S. college students receive 
undergraduate degrees in science and engineering. That compares 
to 52 percent in China and 41 percent in Korea. As a result, 
the majority of advanced degrees awarded by U.S. universities 
in the same areas of study are granted to foreign nationals.
    I can tell you that my company has missed business 
opportunities because we couldn't hire professionals with 
specific skill sets to do the work. Now, as part of an 
international network, I have seen sister companies based 
overseas win contracts with American firms because they did 
have the staff to do the work.
    I can also tell you that over our 13 years in business some 
of our best people joined us via the H-1B program. They are 
incredibly bright people, and the vast majority of them are 
interested in building a permanent life here in America. Let us 
in-source talent into America rather than losing the work and 
intellectual capital produced in our American universities to 
other companies overseas.
    Under the current system, this trend is only going to get 
worse. The U.S. Citizenship and Immigration Service announced 
that the fiscal year '08 allotment of H-1B visas was met on the 
very first day applications were accepted, the ninth time since 
'97 that the cap has been reached before the end of the fiscal 
year. And it is the fourth year in a row that the cap has been 
reached before the fiscal year has even started.
    These caps limit how quickly we can grow. It limits our 
ability to stay ahead of our foreign competitors. And if we 
cannot grow, we cannot continue to create jobs here in the U.S. 
At Molecular, we are doing innovative work for some of 
America's largest companies, and we really want to grow our 
business and grow it here.
    TechNet supports efforts to develop a comprehensive 
immigration package that permanently fixes the shortcomings of 
both the employment-based green card and the H-1B visa programs 
this year. We support legislation that gives U.S. employers 
timely access to highly educated foreign nationals. We need to 
eliminate the artificial quotas, the processing delays and 
backlogs that undermine U.S. competitiveness.
    We need to create a flexible market-based H-1B cap that 
would ensure U.S. employers are not locked out of hiring 
critical talent. We need to exempt foreign nationals who earn 
U.S. advanced degrees as well as the foreign-earned advanced 
degrees from H-1B and employment quotas.
    We need to streamline the path to permanent resident status 
for graduates of bachelor's or higher from U.S. universities 
who have job offers from U.S. employers, and we need to 
increase the number of employment-based permanent resident 
visas, known as EB green cards.
    In conclusion, in an increasingly competitive global 
economy, the U.S. cannot afford to lose its edge in attracting 
and retaining the world's best talent as a result of 
complicated and restrictive U.S. immigration policies. We 
commend the Committee for its focus on these pressing issues 
and urge you to play a leadership role in ensuring that high-
skilled immigration reform happens this year.
    Thank you.
    [The prepared statement of Mr. Folz may be found in the 
Appendix on page 78.]

    ChairwomanVelazquez. Thank you, Mr. Folz.
    Our next witness is Mr. Robert Rector. He is a Senior 
Research Fellow at the Heritage Foundation. He played a major 
role in crafting the federal welfare reform legislation passed 
in 1996, and he has conducted extensive research on the 
economic costs of welfare and its role in undermining families.
    Welcome, sir.

  STATEMENT OF ROBERT RECTOR, PH.D., SENIOR RESEARCH FELLOW, 
                      HERITAGE FOUNDATION

    Mr.Rector. Thank you for having me as a witness. I am here 
to talk about the--my expertise is government spending and 
government programs, and I am here to talk about the fiscal 
costs of immigration, particularly low skilled immigration, 
immigrants who do not have a high school degree.
    I have analyzed in the United States there are about four 
and a half million immigrant households headed by individuals 
that do not have a high school degree. About half of these are 
legal; about half are illegal. About a third of all immigrant 
households in the United States are headed by high school 
dropouts, compared to about 9 percent among the native 
population.
    I analyzed the fiscal cost of these households. That is, 
the total benefits that they receive minus the taxes that they 
pay in to the American government system. I cover a full range 
of all government benefits, including Social Security, 
Medicare, 60 different welfare programs, public schooling, 
police and fire. I don't have defense, I don't have interest, 
just things that are sort of directly consumed.
    The methods I use are exactly the same as those used by the 
National Academy of Sciences in their study of the fiscal 
impact of immigration 10 years ago, and the conclusions I get 
are basically the same. A lot of people say, ``Well, immigrants 
get less of these benefits. All of my data is based on the 
immigrants' self-report in the Census of whether they got the 
benefit or not. If they said they got food stamps, then I count 
food stamps. If they don't get it, they don't get it.
    And what I find is that the typical low skill immigrant 
household receives about $30,000 a year in benefits from 
federal, state, and local governments, and it pays in about 
$10,000 in taxes. It pays very little income tax, but it pays a 
significant amount of Social Security tax, a lot of sales and 
consumption taxes. That means that each of these households is 
receiving each year about $19,500 worth of benefits that they 
didn't pay for with the taxes that they paid in. Somebody else 
has to pay for that, and that somebody else is the American 
taxpayer.
    Overall, these households cost the taxpayer on net, 
benefits minus taxes that are paid in, $89 billion each and 
every year. These households are in deficit, fiscal deficit, at 
every stage of the life cycle. From the moment they walk in 
this country and form a household they begin to cost the 
taxpayers more in benefits than they pay back in taxes, and it 
kind of gets worse. By the time they get to retirement age, 
they are drawing down about $10 of benefits for every dollar 
that they are paying in.
    The net lifetime cost of a low skill immigrant who comes 
into the United States and brings a family and remains here for 
life is around $1.2 million. That is something that--benefits 
in excess of the taxes that they pay into the system. And, 
again, this really shouldn't be surprising.
    People say, ``How can they get $30,000 in benefits?'' Well, 
the average household in the United States gets around $22,000 
in benefits. These households get an additional $10,000 or so 
from the 60 different means-tested welfare programs in the 
United States, and they pay very little in taxes. That is why 
they are in deficit.
    The reality is that the United States has a very generous 
system for supporting less advantaged workers. We don't require 
much from them. We provide basically free schooling, welfare, 
Medicare, Social Security. We can do that for individuals born 
in the U.S. But if you try to do that for a huge inflow of 
similar individuals from abroad, we simply can't afford that as 
a nation.
    Well, now look at this from the perspective of employers. 
Employers say to me, ``Well, we have to have this type of 
worker. We really need these families.'' You know, and I always 
say, ``Well, look, each worker of this sort, of a very low 
skilled worker that you bring in from abroad, costs about net 
$18,000 in excess taxes. Do you as the employer want to pay 
that?'' And every one of them I have ever asked, ``No, no. I 
don't want to pay that.'' Well, who does? Who do you want to 
pay that? ``I don't care, as long as it is not me.''
    And so the reality is that we are irrationally subsidizing 
a lot of this employment through the general taxpayer in a way 
that really does not make sense. And if the employers had to 
bear the full fiscal cost of these choices, they would make 
different types of choices.
    Another topic that we are looking at here today is amnesty 
or earned citizenship, or so forth. The most important thing to 
understand about that is that very few illegals are now 
elderly, and very few illegals have eligibility to Social 
Security, Medicare, Medicaid, and SSI, Supplemental Security 
Income. If you grant amnesty and legal permanent residence, 
they will have access to those things.
    None of these--for the most part, none of these individuals 
have ever been net taxpayers. When they hit retirement, which 
would occur about 20 years from now, they are going to draw 
down out of programs. The net cost to the taxpayer of that, of 
granting amnesty to nine million current adult illegals, about 
20 years from now, will be $2.5 trillion net cost. That is with 
a T, $2.5 trillion, in net cost. And those costs will slam into 
the system at exactly the point the Social Security system is 
starting to go bankrupt.
    The conclusion is that the current open border system is 
expensive. Guest worker programs that grant legal permanent 
residence would be even more expensive, and amnesty is very 
expensive. What we really need as a nation is an immigration 
system that allows perhaps some temporary workers without 
access to the welfare system, but, in particular, focuses on 
bringing in high skilled workers who will pay much more in 
taxes than they take out in benefits.
    Thank you.
    [The prepared statement of Mr. Rector may be found in the 
Appendix on page 84.]

    ChairwomanVelazquez. Thank you, Mr. Rector.
    Our next witness is Mr. Mark Krikorian. He is Executive 
Director of the Center for Immigration Studies. The Center for 
Immigration Studies promotes public knowledge and understanding 
of the need for an immigration policy that gives first concern 
to the broad national interest.
    Welcome, sir.

STATEMENT OF MR. MARK S. KRIKORIAN, EXECUTIVE DIRECTOR, CENTER 
                    FOR IMMIGRATION STUDIES

    Mr.Krikorian. Thank you, Madam Chairwoman. There is a lot 
of ways to look at this issue of immigration and small 
business, but maybe the best place to start is with the opinion 
and views of small businessmen themselves.
    The National Federation of Independent Business and the 
National Association for the Self-Employed, the two main 
organizations speaking for small business as a whole, surveyed 
their membership last year on this specific issue, and they 
found overwhelming concern among their membership for illegal 
immigration, overwhelming support for increased penalties 
against their fellow employers, who knowingly hire illegal 
immigrants, and overwhelming opposition to letting illegal 
immigrants stay.
    None of this should be surprising, because in some sense 
small business is America, given the depth and breadth of small 
business ownership and entrepreneurship in our country. And so 
the views of small businessmen simply reflect the broad public 
dissatisfaction with our current policy of open borders through 
non-enforcement of the immigration laws.
    But there are some specific issues, specific to small 
business, that are worth briefly touching on. First, the large 
scale use of foreign labor is actually harmful in the long run, 
even to the small businesses and the industries using it. As 
Barbara Jordan's Commission on Immigration Reform wrote a 
decade ago, ``The availability of foreign workers may create a 
dependency on them.'' In other words, as with drugs or alcohol, 
easy availability of foreign labor can create a sort of 
addiction, rending the user incapable of imagining life without 
a fix.
    But in a free market system like ours, industries evolve 
and adapt in response to changing labor characteristics and 
changing standards. For instance, nearly a century ago, small 
businessmen told--testifying before Congress said that child 
labor was essential for the functioning of their business. One 
small businessman said that ending child labor would ``paralyze 
the country.'' Of course, it didn't work out that way, and 
precisely because a flexible economy like ours can and will 
adapt to changing labor market standards.
    When lawmakers--today's lawmakers acknowledge the existing 
social consensus against the addiction to foreign labor, legal 
and illegal, those industries where some small businesses have 
become addicted to that foreign labor will adapt in ways that 
Adam Smith would have easily understood--offering better wages 
and benefits and changing the working conditions and 
recruitment practices to attract and retain legal workers, 
while at the same time finding ways of using the existing labor 
pool more efficiently, whether through increased harvest 
mechanization, increased use of prefabricated housing, what 
have you.
    Those who say otherwise are in fact telling the truth as 
they see it. The problem is--in other words, they are not 
lying. The problem is they are too close to the situation to 
see the big picture. They cannot see the forest for the trees, 
just like the small businessmen using child labor were unable 
to see the forest for the trees. It is Congress' job to step 
back and look at the whole forest, not focus on the bark of a 
single tree, if you will.
    Two other issues I quickly touch on that are relevant to 
small business. The question is--or the claims are that using 
an electronic verification system to verify the status of new 
workers will be burdensome and sort of a burden--a new mandate 
on employers. In fact, that is not the case. All of the 
information that a verification system would collect is already 
collected. In fact, the only way that would change is if 
Congress abolished the Social Security system and income tax 
withholding, and I don't see that happening any time soon.
    So that being the case, verifying that already collected 
information through a free, easy, quick system is clearly not a 
burden or a new mandate. And I can speak with experience about 
this, because the existing voluntary electronic verification 
system is something my own small business participates in, and 
it is quick and it is easy and it represents no burden at all.
    In fact, a mandate for all businesses to verify--
electronically verify their new workers isn't just a question 
of penalizing employers. In fact, it empowers legitimate 
employers to make sure they actually know who they are hiring 
and are able to build a workforce on concrete, if you will, 
instead of on sand.
    And a final point that Congressman Gutierrez referred to 
was the fear that a tighter immigration system, whether it is 
through enforcement or changing some of the categories, would 
somehow reduce entrepreneurship. And the contention here is 
that immigration is somehow--immigrants are somehow uniquely 
entrepreneurial, and immigration represents sort of a booster 
shot into a tired America and increases our entrepreneurial 
energies.
    Fortunately, when you look at the data, there is actually 
nothing to that at all. Immigrants are actually slightly less 
likely to be entrepreneurs than native-born Americans are. 
Certain ethnic groups are more likely to be entrepreneurial. 
Koreans, for instance, are more likely to be self-employed, but 
immigrants overall are actually slightly less likely to be 
self-employed than native-born Americans are.
    And so any change in immigration policy is, in fact, not 
going to have any significant effect on America's 
entrepreneurial situation.
    Let me end there, and I will be happy to answer any 
questions that the Subcommittee may have. Thank you.
    [The prepared statement of Mr. Krikorian may be found in 
the Appendix on page 94.]

    ChairwomanVelazquez. Sure. Let me start with you, sir.
    Mr.Krikorian. Yes.
    ChairwomanVelazquez. Where is the scientific data or 
research that proves that immigrants are not entrepreneurial? 
Places like New York--if you go to every corner, the grocery 
store, the manufacturing plants, they are Korean, they are 
Hispanic. I don't know where you mean when you talk about 
immigrants, because then you say Koreans, they are immigrants, 
too. So I am a little confused here.
    Mr.Krikorian. I would be happy to explain that. Anecdotes, 
unfortunately, don't tell us anything about the broad 
situation. There are, in fact, large numbers of immigrant 
entrepreneurs, but the Census Bureau in various surveys asks 
whether people are self-employed or not. That is essentially 
the marker of being--owning a small business, being 
entrepreneurial.
    And the fact is that the most recent data, this is from 
2005, shows that about 11 percent of foreign-born people in the 
United States, regardless of who they are, where they are from, 
when you put them all together, 11 percent of immigrants are 
self-employed versus about 13 percent of native-born Americans. 
So that means there is a lot of immigrant entrepreneurs. It is 
just that they are no more likely to be entrepreneurs than the 
native-born.
    ChairwomanVelazquez. Yes. The same Census data shows that 
if we take one sector like Hispanics, because for some people 
Hispanics are the immigrants, are the fastest growing sector. 
And in places like New York, Hispanic businesses are even 
triple the national average.
    So I don't get it. Anyway, I will recognize Mr. 
Westmoreland, and then I will come back and ask another 
question, and allow for the other members to ask questions.

    Mr.Westmoreland. Thank you, Madam Chairman. And thank all 
of you for being here.
    Mr. Rector, I wanted to ask you a question. You talked 
about both the legal and the illegal that are in this country. 
Did that--the benefit number stay the same whether they were in 
the country legally or illegally? Or is that just for the 
illegal?
    Mr.Rector. This covers all low skill immigrant households, 
so it has both of them. The illegals probably get somewhat less 
in welfare, but they do get welfare. Why is that? Well, the 
reality is that most of them have children, and those children 
are all eligible for welfare benefits. They are actually 
eligible for welfare benefits even before they are born. Most 
of them are paid for--the birth is paid by Medicaid, and so the 
welfare system is actually focused around the child.
    So these households do draw down a lot of welfare. They get 
somewhat less government assistance than other households, but 
the main difference between illegals low skill and legals is 
that the illegals have very few elderly people. Okay? And the 
most--if you look at the charts I have provided, this type of 
household is always in deficit. They always receive more in 
benefits than they pay in taxes. But they really go into 
deficit of about $30,000 per household per year, once they hit 
retirement.
    So one of the major effects of legalizing that illegal 
population is you are going to let them stay here over time, 
and then they are adding in about 10 million people into Social 
Security retirement. That is the single most expensive thing 
you can even begin to imagine, and you would be adding those 
people in at exactly the point that Social Security is its 
maximum crisis. It is an absolute fiscal disaster for the 
United States.
    Mr.Westmoreland. Do you have any statistics about how many 
of the people that are in this country illegal, undocumented, 
that have compromised identification, I guess we could say, 
that are actually now having taxes and Social Security taken 
out on them that probably will never get it back, or, you know, 
are receiving some type of benefits? Do you have any idea 
what--
    Mr.Rector. I do.
    Mr.Westmoreland. --that number is?
    Mr.Rector. Yes. Well, among illegals, the general estimate 
is that about 55 percent of them are working on the books, and 
45 percent are off the books. So those that are working off the 
books are not going to be paying FICA tax or income tax.
    But on the other hand--well, first of all, they don't pay 
much income tax anyway, because of the school level. But if you 
look at all of these, let us throw the legals in, too, because 
I assume they all pay FICA tax. I think that is true. The 
reality is that they are paying about $3,000 a year in this 
type of taxes, but they are drawing down $30,000 a year in 
benefits.
    So any analysis that just looks at the Social Security 
Trust Fund and says, ``Oh, look, there is this little dribble 
of money coming into Social Security,'' you have to look at it 
holistically. And if they are putting in $3,000 a year into 
Social Security, but drawing down $30,000 a year out of general 
revenue, well, who the heck is paying for that? Well, the 
Social Security retirees are paying for it, everybody else is 
paying for it.
    You have to look at across the board, and across the board 
this type of individual, because we have a system of very 
serious income redistribution in our country, this type of 
household is always a net receiver from the taxpayer. The 
longer they stay, the more we pay. A lot of people say what we 
need is younger workers to help us with Social Security. As my 
analysis shows us, no, absolutely not.
    What you need is higher skilled workers. They will pay more 
in than they take out in taxes. With a low skilled worker, the 
younger they are, the more they cost over time to the U.S. 
taxpayers, because they are always net losers.
    Mr.Westmoreland. Thank you.
    Mr. Silvertooth, I come from a builder background and use 
many roofing contractors, by the way, but I also used a lot of 
subcontractors. And as you know, we put an amendment on the 
House-passed immigration bill that we did last year that set a 
standard of knowingly hiring an illegal immigrant. I understand 
that now there is some folks out there and some conversation 
about changing that standard from knowingly to reckless 
disregard.
    And I would like to know if you have looked at those two 
different terms and could put your input into whether the 
``knowingly'' or the ``reckless disregard'' and how that would 
affect your business.
    Mr.Silvertooth. Thank you, Congressman. The answer to this 
is very simple for the construction industry. We are an 
industry that is defined by contractual relationships, as you 
indicated. The knowing standard would establish clearer 
guidelines for prosecution of an employer for a violation.
    Reckless disregard or even a lower standard, such as reason 
to know, which is also being contemplated currently in 
discussions, would lower the standard, making it easier to 
prosecute an employer by inferring this notion that, well, a 
reasonable person would have done this, a reasonable person 
might have done that. You didn't, so we are going to go after 
you.
    Well, as you said in a hearing earlier this year regarding 
a level playing field, if you ever see one, please take a 
picture of it, because you have never seen it before. I am not 
really sure who that reasonable person is. It is a straw-man 
argument. It is thrown out there as a standard, and it might be 
a standard that no business would be able to live up to.
    Also troubling about this, and this is particularly for the 
construction industry, but it would affect any type of business 
that has a contractual arrangement, is this notion of vicarious 
liability where you are held to--you are held liable for the 
actions of another employer and their hiring practices, but you 
don't really have the power to hire or fire that employer's 
employees.
    And we think that is not an appropriate standard of 
liability either, particularly you don't have the power to do 
anything about it. But if we are going to be migrating to a 
system in which every employer in the country is participating 
in some type of new verification system, and DHS believes that 
they have confidence in the system and that there is--they have 
high voracity in it, then it strikes us as redundant and 
superfluous, frankly, to have an employer on the hook for the 
actions of another. If the system is working, DHS ought to be 
able to catch the subcontractor.
    Mr.Westmoreland. Thank you.
    ChairwomanVelazquez. Thank you.
    Ms. Clarke.
    Ms.Clarke. Thank you very much, Madam Chair. I just wanted 
to direct my question to Mr. Silvertooth and Mr. Johnson. And 
this has to do a little bit with the STRIVE Act. You know, that 
is our centerpiece legislation on immigration reform in the 
House, and it covers many areas including the new worker 
program.
    There are triggers in the bill. You are probably both 
familiar with these triggers. I wanted to--and the Department 
of Homeland Security--it states that the Department of Homeland 
Security may not implement the new worker and legalization 
programs until it completes a certification process.
    Can you explain these triggers in the STRIVE Act, and do 
you think these triggers prevent or unreasonably delay the 
implementation of legalization or new worker programs? And you 
may also--some other folks on the panel may have some thoughts 
around this.
    Mr.Silvertooth. The inclusion of triggers I think is 
probably important from a political standpoint in order to 
build the political will within Congress to make sure that we 
can get comprehensive reform. At the same time, we are strong 
believers that there needs to be four legs on this stool.
    There has got to be border enforcement, there has to be 
interior enforcement, there has to be some type of future flow 
program, so we are not setting at this table again 20 years 
from now scratching our heads wondering what we did wrong in 
immigration reform, and there needs to be some type of 
transition to some type of legal status for those that are 
currently here in an undocumented capacity.
    If we do something short of that, if we put these triggers 
out there and we start enforcing first, there needs to be a 
transition protection for those workers that are currently in 
the economy, and there needs to be transition protection for 
those businesses that are using those workers currently, 
because they are grappling with an imperfect system, and it 
would be unreasonable to start enforcing on them for a failed 
status quo.
    So that would be my initial comments.
    Mr.Johnson. Yes. Since we don't lobby on legislation, maybe 
I am not as constrained by the politics of this issue. But I am 
troubled by the idea, because you don't see it in any other 
context, right? We don't say that we are going to wait to make 
sure there is no more tax fraud before we reform our tax system 
or no more health care fraud until we reform our health care 
system.
    And in the immigration context, the key to getting control 
of the borders is dealing with, you know, one of the root 
causes of undocumented immigration, which is this sort of 
schizophrenia that we have at our border, the fact that our 
economy hangs up a Help Wanted sign, and then our immigration 
system hangs up a Keep Out sign.
    And an effective border enforcement policy has to confront 
the sort of disconnect that we have between our economic 
policies and our immigration policies. Otherwise, the prospects 
of gaining control over the border is going to be enormously 
expensive. We have in the last 10 years quintupled the amount 
of money we spend on border enforcement, tripled the size of 
our border patrol departments, and the result is we have more 
undocumented immigration, more deaths at the border, a huge 
growth in the business of human smuggling.
    So the fact that we are trying to--you know, that part of 
the enemy here is our own economic demand, makes the costs of 
fighting ourselves much, much more expensive than it has to be. 
I don't see any reason why you can't do both. You need smarter, 
more effective enforcement. But part of the way that we gain 
control of the borders is making sure that we have a system 
that is responsive to the family and employment demands that we 
have in our economy.
    Ms.Clarke. Ms. Torrey, you wanted to comment?
    Ms.Torrey. Yes. I would just like to add, on behalf of the 
agriculture community, along with the comments that Mr. 
Silvertooth made is that the STRIVE bill is fine for us except 
the main problem is the triggers. Agriculture can't wait for 
the programs to be implemented. We are in a crisis situation 
right now.
    And the agriculture community recognized this over 10 years 
ago and started addressing the issue, and we need to have some 
type of program that works for us now, and we can't wait.
    Thank you.
    Mr.Krikorian. Yes. Thank you, Ms. Clarke. I can't comment 
on the internal politics within Congress, but the reason the 
trigger idea is introduced--and I am somewhat dubious of it, 
but the reason it is there is because no one believes the new 
rules will be enforced, and with very good reason.
    In 1986, the deal was a grand bargain. Prohibition of the 
employment of illegal immigrations for the first time ever, in 
exchange for, as it were, tying up the loose ends, legalizing 
the illegals who were here. The amnesty part of it came up 
front; the promises of enforcement were to come in the future. 
They were abandoned.
    And no one believes--and, I mean, I think the public 
largely doesn't believe either that new bodies of rules will be 
enforced. And in a sense, the sense is fool me once, shame on 
you, but fool me twice, shame on me. And that is why a trigger 
requirement is attractive to a lot of people, because it 
prevents--it makes sure that the enforcement happens first, at 
least some of it, before the legalization follows.
    ChairwomanVelazquez. Thank you.
    Mr. Sestak.

    Mr.Sestak. Thank you, Madam Chair. I just had two 
questions. Mr. Krikorian, when you did your analysis of--on the 
11 percent and the 13 percent, when you went back to the 1800s 
and looked at the percentages for the immigrants then, and 
their entrepreneurship as compared to the population then, what 
were the percentages?
    Mr.Krikorian. We didn't, and I am pretty sure the reason 
for that is the Census Bureau doesn't keep those kind of--
    Mr.Sestak. Who do you think would?
    Mr.Krikorian. I have no idea. Probably--
    Mr.Sestak. How far back did you go?
    Mr.Krikorian. Well, we--
    Mr.Sestak. I mean, is this statistically--if I could, is 
this statistically important, the 11 and 13 percent? I mean, if 
you went back 50, 60, 80 years, I mean, that just might be what 
things are. You know, 11 percent now, and three decades from 
now they--all of a sudden you have, you know, a standard in 
oil. I mean, is it really significant what you are telling us, 
if you can't go back and say, ``What is the reference for it''?
    Mr.Krikorian. No, I understand. We actually went from 1970, 
'80, '90.
    Mr.Sestak. No, I know that.
    Mr.Krikorian. 2000.
    Mr.Sestak. But I am trying to get back to, you know, maybe 
the last great wave of immigration.
    Mr.Krikorian. I understand.
    Mr.Sestak. You know, the Irish or, you know, something like 
that, because we come in waves, you know.
    Mr.Krikorian. Nobody asked, number one, back then.
    Mr.Sestak. It would be very interesting to know, because 
you are saying these statistics are important, but I don't have 
any reference for them. Eleven and 13 percent compared to the 
last great wave of immigration, I would love to see, because I 
would think coming in here and just getting a job--you are 
probably coming here to make sure your kids can eat, and 
somewhat you are less risk--more risk averse, if that is the 
case. You kind of get going and steady them out a bit, and then 
maybe the entrepreneurship comes.
    I have a question for you, Mr. Rector. I was really taken 
by your comments about how you needed to do this holistically. 
Do you remember the last comment you made? If you really do 
your analysis holistically, as I listened to these here say, 
and those less--those people can't put as much into the system 
as you say, aren't putting as much into the system, if they are 
removed, they disappear with a magic wand, what is the cost 
attendant to this nation's economy, if it could?
    In other words, if you really do want to do a holistic 
analysis, what are the benefits that accrue from having them 
here to the quality of our lives--a non-leaky roof? I mean, and 
the taxes attendant to being able to have a farmer produce more 
fruit. What did your analysis show for that?
    Mr.Rector. My analysis doesn't cover that, but I can answer 
that. If you--
    Mr.Sestak. But if we have to do holistic, shouldn't we do 
that?
    Mr.Rector. If you jerk them all out of the economy 
tomorrow, you would have a big shock effect. But let us look at 
it another way. If you look at the flow of illegals that we 
currently have coming in, we are probably going to bring an 
additional seven million low skill illegals in under the status 
quo--
    Mr.Sestak. If I could interrupt for a moment. you took a 
snapshot. It wasn't a fluid or dynamic situation at this 
moment. And you presented it here as something very important--
this snapshot--and emphasized it was to be seen in a holistic 
way. If you take that snapshot today and look at the benefits, 
forget the cost in disappearing, potentially that was the wrong 
way to ask it, but you look at the benefits that accrue to this 
from more taxes paid into the system, from growing businesses 
and things like that, what does your analysis show for that? 
And if that is not done, why not do that? Shouldn't that give 
us the holistic cost-benefit analysis?
    Mr.Rector. I do account for all of the taxes paid into the 
system.
    Mr.Sestak. From the businesses? In other words, the roofing 
business is able to do something because they have people 
letting them do something, and they grow bigger and they pay 
more taxes. Without those people here, they wouldn't pay more 
taxes. In other words, that snapshot.
    Mr.Rector. That is--
    Mr.Sestak. If you pride yourself on holistic approach.
    Mr.Rector. I think what you are getting at is the 
contention that by adding more immigrants in--
    Mr.Sestak. No, that is not what I am getting at. What I am 
getting at specifically is you said that holistic approach was 
important. Your holistic approach looked at this--what these 
people put in and what they took out into government, but not 
the economy. And so, therefore, what does that cost-benefit 
analysis show, and shouldn't we do that whole picture?
    Mr.Rector. Absolutely. And I--and, for example, the 
National Academy of Sciences did that analysis in their 1997 
study, and they found that the net economic gain from 
immigration was between $1- and $10 billion a year. It is very, 
very small. And there really--this is the way to separate this 
question out. There is no doubt that when you add illegal 
immigrants into the economy you get a bigger GDP. I mean, 
obviously you do. You have a larger economy.
    The real question is: does the fact that you have a larger 
economy mean that the average American citizen has a higher 
post-tax standard of living or income as a result of that? And 
that is really the issue, okay? And what my study is indicating 
is, no, that there would have to be massive positive 
externalities to make up for these huge fiscal costs that come 
along with this type of labor.
    And you don't get that. You do not get--I draw a wage. The 
fact that I draw a wage does not magically make you richer, 
okay? Just adding labor into the economy--one way of looking at 
this is let us say you have a factory, you have 10 employees, 
okay? Next week we add one additional employee. Now, a lot of 
people say, ``Oh, well, the output of the factory just went up 
10 percent.''
    Well, the real question is: what happened to the wages of 
the first 10 workers? Did they go up? Did they go down? And 
that is the question you have to ask, and there is, in fact, to 
my knowledge virtually no economic literature that shows that 
just by adding low skilled labor into the economy that the 
incomes of the average citizen post-tax get better. In fact, 
they seem to get significantly worse.
    Mr.Sestak. May I have just one moment?
    ChairwomanVelazquez. Yes, Mr. Sestak.
    Mr.Sestak. I guess I--I appreciate your tangent there. My 
question just is that I am taken by any analysis, but I have 
always been more taken when it is more holistic. And I think 
that I understand the ins and the outs to government, and you 
have now said, okay, there is some document here that says 
there is more benefit. I am not arguing whether we should have 
more illegal immigrants. I am not arguing that issue at all.
    I just want to make sure when someone comes forward and 
presents the benefit and the cost that it is the most holistic 
way, and that is my only point. And I would like to have the 
other study--the research you said you have done--that leads 
you to believe, because you must have great regression 
analytical capability that you can pull out Tax Code policies, 
impact of tax policies, etcetera, to show that more people--
illegal or whatever--don't add that much benefit, the one that 
you mentioned that, if I heard you correctly.
    Mr.Rector. That was the National Academy that--
    Mr.Sestak. No, no. There was another one you said that your 
analysis says that--and maybe I missed the point--but you have 
also done some extrapolation on your own when you went off 
there for a while. Do you know what I am saying? Whatever that 
area is--I have gone on too long, but whatever that analysis 
is, I would love to have it.
    Thank you, Madam Chairwoman.
    ChairwomanVelazquez. Thank you, Mr. Sestak.
    Following the statement made by Mr. Rector, I would like to 
direct my question to Ms. Torrey and Mr. Silvertooth. He stated 
that there is a drain of--he talked about the drain that 
immigrants have on our economy and our government. And you 
both, Ms. Torrey and Mr. Silvertooth, have spoken about the 
importance of immigration to the agriculture and the 
construction sector.
    So these are both billions of dollars industries. So can 
you talk to us about how immigration has allowed for growth in 
your industries?
    Ms.Torrey. I will go ahead, and I will give a personal 
example. Our small community in upstate New York, two to three 
generations ago, the migrants were the Italians, and they were 
the people working in the fields, sleeping in barns, and going 
home on the weekend. The first generation did that, the second 
generation became the workers, the third generations have left 
the farms.
    In the late '70s, the Hispanics became our workers. Our 
farm--in 1978, we only owned 146 acres of land. The only reason 
why we have grown is because of our Hispanic workers. We have 
three generations working for us. They work--we offer a 401(k), 
profit-sharing program. We have a lot of extended families, we 
have families with 45 to 60 people in them. It is an entry-
level with a skill that they can bring from their country to 
help grow our food industry.
    And then, their hopes and dreams for their children are to 
educate themselves and go on. And it has made a thriving 
industry here in this country.
    ChairwomanVelazquez. Thank you.
    Mr. Silvertooth.
    Mr.Silvertooth. Our experience has been very similar. As I 
indicated in my testimony, you know, two-thirds of the new 
entrants into our economy, into the construction economy last 
year, were Hispanics, and a huge percentage of those were 
foreign-born immigrants.
    There is a few reasons that is happening--our birth rate is 
low, our population is aging, people are cycling out of the 
workforce, and at the macro-economic level in this country the 
reigning educational philosophy through the Department of 
Education and subsidizing student loans is that we should send 
our native-born Americans to four-year colleges and get them 
through that.
    A lot of the service sectors have a very tough time 
attracting people into our industry, despite the fact that 
construction is one of the quickest paths to entrepreneurship, 
as is the restaurant industry. The other thing that you see in 
our industry is that the average wage in construction this past 
March was $21 an hour, and yet we still have shortages across 
the country.
    Now, admittedly, they are geographically disparate, but I 
have contractors in the San Francisco Bay area that offer a $40 
an hour package, and they have vacancies. They have to pass up 
work as a result of that. And that contracts the economy, that 
contracts the GDP as well, because there is work that could be 
performed that is not being performed. Sixty-nine percent of my 
members reported in a survey last year that they were short 
workers, that they were not able to access the workers they 
needed. And close to half of those indicated that they had 
passed up on work because of that phenomenon.
    So to the small business industry in general, foreign-born 
labor, the ability to access that when there are not American 
workers available is absolutely critical. And if we are not 
able to do that, our industries are going to atrophy.
    ChairwomanVelazquez. Mr. Folz, can you comment on 
immigration in your industry?
    Mr.Folz. All I can is that listening to all of the 
testimony so far that immigration is a very important part of 
our company. It brings diversity to our company. These are 
people that are some of our best employees. They want to live 
here permanently.
    I would also add that for every employee we can add to our 
company means about a quarter of a million dollars of revenue 
for our company. So in terms of measuring holistic impact, it 
is much more than the taxes they pay in. It has tremendous 
impact, and that doesn't even count the work we are able to do 
for our American clients that help their business. So I think 
it has a magnifying effect.
    ChairwomanVelazquez. Yes. Mr. Folz, you mentioned in your 
testimony that last month the fiscal year 2008 allotment of H-
1B visas for skilled foreign-born employees was exhausted six 
months before the start of the fiscal year. That means that 
there is at least an 18-month wait for new visas. Can you help 
the Committee understand the implications of this situation for 
a technology company like yours that might here from a good 
customer that they intend to double their order next year?
    Mr.Folz. Yes, it is quite simple. If I have a customer that 
would like to do more business with us, and I have a vast 
shortage of engineers that I can hire into my company, I will 
give you a real example. We have--we recently hired two college 
graduates, foreign nationals. They can stay here for a year 
under a practical work visa, but they did not--we were not able 
to get them a visa in the latest allotment.
    And because of this--because of the timing, I can have them 
for a year. And if they don't win the next lottery, even if 
they do, there is going to be a gap in time where they are 
going to have to leave the country. It is incredibly 
disruptive. And for a small business, too, it gives us pause as 
to whether we can even take the risk in the investment in 
hiring these great people.
    ChairwomanVelazquez. Okay. Ms. Torrey, in your testimony, 
you talk about the ordeal that you face regarding some of the 
problems with our current verification system, both at the 
federal and state level. So my question is: do you support an 
electronic or telephonic verification system that will provide 
greater certainty that you are provided with legally authorized 
workers?
    Ms.Torrey. Yes, if we--as long as we--not only being 
electronically, it also needs--we need to be able to do it by 
the telephone, because some hiring is not done in an office. It 
is done out in the field. It needs to be simple. The number of 
acceptable documents must be reduced to a few.
    We must make sure that it prevents identity fraud. The 
verification system must give fast confirmation, as we hire 
seasonal workers that come and go. It has got to work fast for 
us, because when a crop is ready to harvest, to wait 30 days is 
not the answer for us.
    And the other thing is when we hire these people, we also 
have to provide housing. And if someone has moved in, and all 
of a sudden after the process, how do I get them out? And I 
have turned away somebody else that probably had proper 
documentation.
    ChairwomanVelazquez. Thank you.
    Mr. Johnson, about 12 percent of the construction 
industry's workforce is undocumented employees. That number 
percentage is even higher for many other industries. In 
agriculture, it is 13 percent; food manufacturing 14 percent; 
and in private households, it is as high as 21 percent. With 
such a large number contributing to the total workforce, some 
have suggested an earned legal status for these workers will 
have the least damaging effect on our economy. What options are 
available to integrate these workers who are already here?
    Mr.Johnson. Well, integration, I mean, in the larger sense, 
you know, has to be part of this equation as well. I mean, and 
one of the, you know, benefits of allowing people a path to 
permanent status, I mean, I think there is a role for a 
temporary worker program for, you know, truly seasonal 
temporary jobs.
    But an over reliance on a temporary worker program, 
particularly for jobs that are permanent, I think cuts off our 
ability to incorporate these people into our society. Language 
acquisition, home ownership, economic development--those are 
the keys to integration, giving people the tools and the 
resources that they need to become part of our communities, 
both from a communication as well as from an ownership 
perspective, is an essential part of the value that we have 
gained from immigration.
    I certainly would like to see us have more carrots and not 
a lot more sticks when it comes to integration.
    ChairwomanVelazquez. But, Mr. Johnson, what will you tell 
opponents who believe that this is rewarding those who have 
cheated the system?
    Mr.Johnson. Well, I would say that those people who are in 
the United States in an undocumented status, I think that there 
is--sort of agreeing with Congressman Gutierrez, I think there 
is a penalty to be paid for that, but that penalty has to be 
proportional to the offense. And I think we also, quite 
frankly, need to keep in mind that victims--or that immigrants 
themselves are also victims of our dysfunctional immigration 
system.
    They are drawn here by the Help Wanted sign that our 
economy hangs at the border. And for the most part, they come 
through the back door because the front door is closed. I think 
we have a responsibility to create a system that allows them to 
come through the front door.
    Shifting all the responsibility for our dysfunctional 
immigration system onto immigrants I think is just that--
avoiding our own responsibility.
    ChairwomanVelazquez. Thank you, Mr. Johnson.
    Mr. Davis.
    [No response.]
    I will recognize Mr. Chabot.

    Mr.Chabot. Thank you very much, Madam Chair. And, again, I 
want to apologize for having not been able to be here during 
the testimony. I am going to reread all the testimony from the 
statements that we got last night on this. I had to give a 
speech down the street here, so I do apologize.
    But let me start with you, Mr. Silvertooth, if I can. If 
the cap on temporary H-2B visas was raised, what level would 
you recommend to make a real difference?
    Mr.Silvertooth. Well, currently we are operating under an 
extension of that program where--that is set to expire this 
September, in which workers that have been in the program for 
the previous three years are exempt from that cap. NRCA is a 
member of a coalition that is advocating for an extension of 
that program. We think that makes sense.
    But the way I would answer this question is this. The way 
you need to look at the H-2B visa program is to understand that 
we have shortages in permanent labor in this country, and then 
we have shortages in truly seasonal work in that. What I would 
probably recommend is that we have some type of market 
regulator that looks at the vitality of these industries on a 
yearly basis, what their particular needs are, look at the 
regional variations in terms of need.
    For instance, agriculture--well, agriculture is not covered 
by H-2B, but there are certain industries that would be 
covered, such as seafood processing, the Eastern Shore - this 
is a big issue for them. If they have a bumper crop coming up 
that season, there may need to be an adjustment on that. 
Similarly, we would have to look at what our tourism demands 
are in the country.
    So I think 66,000, if you have this exemption for previous 
workers, is a workable system. But there would need to be some 
type of market regulator and take a look at it in a couple of 
years.
    The other thing that I would recommend in terms of the H-2B 
program is there needs to be particular attention paid to the 
processing of H-2B visas. The system is currently in a state of 
crisis. In Mexico, the largest processor of visas in that 
country is in the Monterrey Consular Office. They just decided 
earlier this year, or at the end of last year, that they would 
stop processing visas for the season, and it took Congressional 
intervention to get them to resume that.
    You have also got problems in regional DOL offices here in 
the country. We are having a devil of a time in the Chicago and 
Atlanta offices in terms of delays.
    Mr.Chabot. Thank you very much.
    Mr.Silvertooth. Thank you.
    Mr.Chabot. Mr. Rector, if I could turn to you next. Before 
I ask a question, I just want to publicly acknowledge your 
important role in one of the most significant issues that I 
think we faced up to in this country during the Clinton 
administration, under a Republican Congress at the time--that 
was welfare reform, and I believe you were at the Heritage at 
the time.
    And many of us, including myself, looked to you for 
knowledge about the right way to go on this. And your 
recommendations ended up being followed not to the letter but 
to a great extent in the welfare reform. Had we followed your 
recommendations, it would have been even better.
    But in any event, thank you for you involvement because the 
welfare roll since that welfare reform was passed that 
President Clinton signed, the welfare rolls are less than half 
of what they were at the time, and we have turned more power 
back to the states. And the time that a person could be on 
welfare was no longer forever, but it was--there were time 
limits. And there were so many things, and you had a lot to do 
with that, so I want to publicly acknowledge that and thank you 
for your work on that.
    Now, turning to my question, it is my understanding that in 
my absence you mentioned that immigration reform should center 
on highly skilled and temporary workers without including 
amnesty. Could you explain why this would be beneficial to the 
economy and why that is the way we ought to go?
    Mr.Rector. I will just quote from the study of the National 
Academy of Sciences from 1997. What they showed was that high 
skill immigrants coming into the United States with a college 
degree pay more in taxes into the system than they take out in 
benefits. They show, conversely, that dropout immigrants take 
out significantly more in taxes than they--in benefits than 
they take in taxes. Therefore, each of those individuals is a 
net cost to everybody in society.
    Moreover, they show that the huge deficit is so large that 
even when you include the fiscal contributions of their 
offspring for the next 300 years, you never make up for that 
initial cost. That is a pretty potent statement, and the 
reality is that in our society what we need are--there are 
probably a billion people across the globe who would like to 
come and live in the United States.
    And we can't admit them all, but we should have a criteria 
of those individuals that we do admit that when we bring them 
in they are a net benefit to American citizens instead of a net 
liability. And the reality is very simple: if I came to you 
today and said, ``Hey, we just added 10 million high school 
dropouts, native-born, across the United States,'' everyone on 
this Committee and everyone in this room would say, ``Well, 
that doesn't sound like a very good idea. That sounds like a 
lot of social problem. That sounds like a lot of government 
cost.'' And as a welfare expert, I will tell you, yes, that is 
an awful lot of governmental cost.
    But somehow, we have imported in the last 20 years 10 
million high school dropouts from abroad. But because they came 
from abroad they suddenly have this magical quality that they 
don't cost us anything and they contribute all this magic to 
the economy. Well, if they contribute magic to the economy, 
then domestic-born high school dropouts must also contribute 
magic to the economy, making everything magically bigger. Every 
dollar that they earn contributes two dollars--there is no 
economic literature that shows that at all.
    The reality is that high school dropouts are costly. They 
generate social problems. Doesn't matter where they come from. 
Therefore, our immigration policy should focus on bringing in 
individuals who will make a maximum economic contribution, and 
who will pay more in taxes than they take out from the system.
    Particularly, if you are looking toward the viability of 
Social Security, you don't want to bring in people that are a 
net fiscal deficit every year that they are in the country. 
They will make the Social Security crisis infinitely worse, and 
that is exactly what amnesty is going to do. It is going to add 
$2-1/2 trillion in costs in retirement in about 20 years, 
exactly the time Social Security starts to go bankrupt. It 
couldn't help but do otherwise. Okay?
    If you want to make Social Security more viable, bring in 
higher skilled workers. And you don't need to do it now, you 
should do it a little bit later, so that they would be 
contributing at the maximum point of crisis.
    Mr.Chabot. Thank you very much.
    Mr. Johnson, if I could turn to you next. In Congress, in 
recent years, and even very recently, we have significantly 
bolstered federal programs to encourage more students to pursue 
math and science and technology fields, so that we can better 
compete in the global economy. Are these programs to respond to 
the need for skilled students and workers, are they working? 
Are they heading in the right direction? What are your thoughts 
about that?
    Mr.Johnson. Well, I mean, they are important investments, 
and I think we need to do more, particularly in the science and 
technology fields, to encourage native-born students to pursue 
those types of degrees. We continue I think to be lacking in 
enrollment and graduation rates for the native-born in those 
areas.
    We have seen some improvements. You know, I hope those 
improvements will continue. You know, there is no question 
that, you know, part of the formula--and this is what I take 
issue with Mr. Rector, is that you need a well-rounded labor 
force. You need a labor force that is made up of people who 
have less education and skills and a labor force that is made 
up of people who have very high levels of education.
    I think we have got to make sure that we are creating a 
labor force that is that dynamic and flexible, and the 
education trends that we are talking about are important. We 
need to do more in terms of those investments.
    Mr.Chabot. Thank you.
    Mr. Krikorian, if I could turn to you next, you have 
written about the false premise that since the Federal 
Government can't quickly deport the 10 to 12 million illegal 
immigrants, the only alternative is legalization or amnesty. 
You have said that the only approach that can actually work is 
shrinking the illegal population. Could you explain how this 
could work, how we could go about following that 
recommendation?
    Mr.Krikorian. Sure. Thank you, Congressman. The way you put 
it is correct, that we are presented with a false choice--
deport everybody tomorrow--Mr. Sestak had said, you know, what 
if everybody disappeared tomorrow? That couldn't happen anyway, 
even if we wanted it to, because we don't have the resources, 
and it would be shocking to the economy and the society. But 
the only alternative is not legalization.
    It is what you could call attrition through enforcement, 
where we enforce the law, and rather than--which we have never 
really even attempted to do before--enforcing the immigration 
law inside the country. So that instead of allowing the illegal 
population to grow every year, we start shrinking it every 
year.
    And this is realistic, because there is already a lot of 
churn in the illegal population, people coming and going, what 
have you, so the thing to do would be to make sure fewer new 
illegals arrive, more of those who are already here leave. And 
almost half of illegals have been here less than five years 
anyway. These are not all people with roots here.
    Essentially, what we have done--what we can do is back out 
of this problem that we have created over a period of years. 
Once we have shrunk the illegal population, once there is a 
political commitment to enforce the law and people actually 
believe that it is being enforced, and with good reason they 
don't believe it now, then maybe we can address the question of 
legalizing some of those who are still here.
    I am not sure I would be for it or not at that point, but 
it is a legitimate topic for discussion, but only then. It is 
not even a legitimate topic for discussion as far as I see it, 
until we have, through attrition, reduced the size of the 
problem and created a mechanism that can in fact enforce the 
new rules.
    Mr.Chabot. Thank you.
    In the interest of time, Madam Chair, I will yield back the 
balance of my time now. Thank you.

    ChairwomanVelazquez. Thank you.
    Ms. Torrey, because the fruits and vegetable industry is so 
labor intensive, it is important that employees in this sector 
have access to the proper visas and documents to work in the 
U.S. What type of documentation is necessary for your industry 
to have, in order to ensure that you have the workers you need 
to do the job? And my other question is: how many graduates 
with bachelor's degrees or master's degrees come to your 
business seeking jobs?
    Ms.Torrey. I do have some that are looking for mid-
management jobs.
    ChairwomanVelazquez. No, no, no. But I am saying, you know, 
to go there and pick the--
    Ms.Torrey. And pick vegetables?
    ChairwomanVelazquez. Yes.
    Ms.Torrey. None.
    ChairwomanVelazquez. None.
    Ms.Torrey. None. None at all. And no matter if I offered 
$100,000 starting would they show up. It is not only fruits and 
vegetables, Chairman, it is also the dairy industry. And they 
are at more--even more of a greater risk than the fruit and 
vegetable, because we do have a dysfunctional H-2A program that 
less than 2 percent of us do use. But the dairy industry does 
not even have that available to them.
    ChairwomanVelazquez. If you don't have access to the 
workforce that you need, what does that mean to the average 
American when they go to the grocery store?
    Ms.Torrey. We are going to see food inflation like we have 
never seen before. It is going to be imported.
    ChairwomanVelazquez. Mr. Folz--
    Ms.Torrey. But worse yet, it is going to be our 
communities--our rural communities are going to be boarded up 
and dying, because we are what keeps--agriculture is what keeps 
a lot of communities alive across this country, and the 
businesses that feed off of them.
    ChairwomanVelazquez. Thank you.
    Mr. Folz, the U.S. Labor Department has estimated that 
nearly one million new jobs in math and computer science will 
be created between the years 2004 and 2014. As I understand it, 
foreign nationals received the majority of the total number of 
advanced degrees awarded by U.S. universities in science, 
technology, engineering, and math fields.
    Without reform of the current H-1B system, wouldn't you 
expect recruiting and retaining skilled employees to become 
increasingly difficult for small technology companies?
    Mr.Folz. I would say that we have that problem today. So I 
have even seen this--this trend has been happening the last few 
years. This isn't something that is happening now and is 10 
years forward. So the last few years it has become increasingly 
more difficult to find people.
    We probably have 20 open positions today that we would fill 
them tomorrow if we had the right candidates. We now pay on the 
order of $30,000 to recruiting firms to find us one engineer. 
So it is becoming dramatically expensive, and we are just 
taking the same engineers from each other rather than focusing 
on more engineers.
    So I think it is both a long-term and a short-term problem. 
The long term, I am fully supportive of everything we do to get 
more children interested in the math and sciences and get more 
people involved in this field. In the short term, the caps on 
the visas are hurting us today and now in our ability to 
service our customers.
    ChairwomanVelazquez. Yes, Mr. Johnson.
    Mr.Johnson. I just wanted to say that it relates to the 
question that Congressman Chabot had as well, which is that, 
you know, particularly at the high skilled end, this isn't 
always just about shortages. I mean, it is a serious question, 
but it is also about specialty skills.
    So even as we improve the graduation rates in science and 
technology, I think it is important that we stay open to the 
fact that, you know, we don't have a monopoly on good ideas 
here in the United States. Sometimes the newest technology that 
is being developed, sometimes the new ideas for how to find oil 
or how to find new resources, or whatever they may be, are 
being developed abroad, and we want to stay open to the idea 
that bringing those talents here to the United States will 
create more job opportunities for the industries that we are 
trying to build. So specialty occupation is as important as the 
concept of shortage as well.
    Mr.Folz. Madam Chairwoman?
    ChairwomanVelazquez. Yes, Mr. Folz.
    Mr.Folz. Since 1990, technology firms have been funded with 
venture capital. Twenty-five percent of them have had founders 
that were foreign nations--25 percent. These are innovators. We 
want them to come here. And these include names such as eBay 
and Yahoo, incredible companies that started small and were 
very successful.
    So when we have a cap, you know, are we excluding the next 
Bill Gates from entering our country?
    ChairwomanVelazquez. Thank you.
    Mr. Silvertooth, employers have expressed concern that the 
error rate for the basic pilot program is too high at 8 
percent. Add that to the fact that the basic pilot only 
services 16,000 employers, and not the 5.6 million employers 
that actually need it, what costs in time and money will 
manually checking each employee's status impose on your 
company?
    Mr.Silvertooth. The initial cost is in terms of 
productivity, because, as you are focusing on administrative 
tasks, you are not focusing on serving your customer's needs. 
This is particularly important for small businesses. A lot of 
us have lean administrative staffs. A lot of the accounting 
departments for small businesses are the kitchen table. 
Sometimes the storage is the garage.
    We are not talking about companies with economies of scale 
such as General Motors or Microsoft that have entire 
departments of thousands of employees that deal with this type 
of situation.
    Regarding the basic pilot program, you are right, we have 
seen error rates that are pretty high so far. It causes 
problems for the employees, as well as the employers as well, 
because you have employees that are in a state of limbo. If we 
were to expand this into the entire employer community, there 
is estimated to be--depending on whose estimates you go with, 
anywhere from about 5.6 to 7 million employers in the country, 
it depends on how you measure a lot of the independent 
contractors--you are looking at a scenario that would overwhelm 
the resources of this government.
    And that, in turn, is going to be put back on business, 
because, once again, you are in a state of limbo. Do you hire 
somebody in the interim? Do you make an offer of employment 
when you are not certain as to what their concerns are going to 
be?
    Congressman Westmoreland noted that the early weeks are 
frequently the most expensive weeks in terms of bringing a new 
employee on board. So there are costs associated with that.
    In terms of the construction industry, we have a unique 
situation, because most of our work is performed outside of an 
office. They are at multiple work sites. Having employers come 
off of the job work site and go to another location is, 
frankly, not a recipe for running a successful business. It 
cuts into your productivity, and we are already seeing a 
diminished productivity because of just absolutely worker 
shortages.
    But it would vary by industry. It would vary by type of, 
you know, business and number of employees.
    ChairwomanVelazquez. Does the Department of Homeland 
Security currently have the capacity or the budget to handle--
    Mr.Silvertooth. The Department of Homeland Security has a 
large budget, I will give them that. Their capacity, it remains 
to be proven. In discussions with them, they are under the 
belief that they could register 10 percent of the American 
economy tomorrow if they had the authority to do it, or if--and 
they do have the authority to do it, but businesses, because of 
the raids that I spoke about earlier, are reluctant to deepen 
their relationship with the Department of Homeland Security, so 
you don't see businesses jumping en masse to jump into the 
basic pilot program. But the answer right now is: we don't 
know.
    ChairwomanVelazquez. Any other comments? Yes, Mr. Johnson.
    Mr.Johnson. On that one, I do think that is one of the 
things we have to consider. I mean, we are pouring ever more 
money into, you know, enforcement that is focused on the 
border, and sort of boots and guns at the border. And I don't 
think we are thinking about both the security implications and 
the important administrative role that adjudicators in the 
agency play here. I mean, they are overworked and underpaid, 
and that agency, as a result, operates sometimes in geological 
time when, you know, the employment industry operates in real 
time.
    So if we want real answers through the employment 
verification system, we need an agency that has enough 
resources and enough manpower to be able to process those 
applications efficiently and effectively, so that the data goes 
into the database in a timely fashion.
    ChairwomanVelazquez. Well, let me--Mr. Chabot, no more 
questions?
    Mr.Chabot. No more questions.
    ChairwomanVelazquez. Okay. Let me take this opportunity 
again to thank all of you. This has been quite an incredible 
discussion. It is, I know, sometimes an emotional issue. In my 
capacity, I will say that this is not only an issue to fix a 
broken system that is not working, but it is also an economic 
security issue for this nation, as well as a national security 
issue.
    And I just want to make sure that you understand that we 
are going to do everything possible to make possible for small 
businesses to know that your concerns will be represented at 
the table, and that we are going to inject ourselves into the 
immigration debate and make sure that when we have a final 
product that it takes into consideration the impact that it is 
going to have on small businesses.
    Thank you very much, and I will ask unanimous consent for 
members to have five legislative days to enter statements into 
the record.
    And this Committee is adjourned. Thank you.
    [Whereupon, at 1:52 p.m., the Committee was adjourned.]



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