Borderline Issues

In June, a proposed immigration reform bill, which would've granted legal status to 12 million illegal immigrants, collapsed in the Senate. In the days before the critical vote, activist groups, like NumbersUSA, arguing that increased immigration damages the economy launched campaigns targeting senators sitting on the fence. The strategy worked, and many of the senators who supported immigration reform but ended up voting against the bill are up for re-election in 2008.

The bill's failure means immigration has returned to business as usual. For some entrepreneurs, that's hardly reassuring. Many entrepreneurial companies, such as restaurants, small inns and contractors, will suffer under the status quo. These business owners say they cannot find legal residents to take often dirty and dangerous jobs. They lobbied hard in June, with the head of the National Roofing Contractors Association testifying before Congress.

"Small-business owners have told this committee time and again that nothing makes them prouder than the jobs they create, but many of today's companies are struggling to find workers," said Congresswoman Nydia Velázquez (D-NY), head of the House Small Business Committee. As the Committee noted, the Bureau of Labor Statistics projects that 18.9 million new jobs will be created by 2014--but there will only be 3 million new workers to fill them, partly because of a decline in American-born workers.

Many other entrepreneurs, however, fear regularizing immigration. Both Democrats and Republicans agree that any future immigration bill will include provisions guaranteeing increased scrutiny of workers to make sure they are in the U.S. legally. This job will fall on employers, and currently, most growing companies don't have the resources to thoroughly examine all their workers' backgrounds. The SBA estimates small companies already spend more than $7,000 per employee to deal with federal regulations. "Requiring firms to absorb another regulatory function will be costly and complex," says Karen Kerrigan, president of the Small Business and Entrepreneurship Council.

Other entrepreneurial companies think focusing on illegal immigration reform has detracted from an even more serious problem: legal immigration. Small IT companies have become reliant on skilled workers, primarily from China and India, who legally enter the U.S. on H1-B visas. Demand for the H1-B has soared--the newest crop of visas was oversubscribed on the first day they were available--and some desperate U.S. tech companies are opening offices in Canada, where it's easier to hire skilled immigrants. Yet any solutions to the H1-B mess have been drowned out by the debate on illegals.

There is little consensus among business owners on how to resolve the immigration challenge. A study by the National Association of the Self-Employed found that most respondents consider illegal immigration a serious concern, but entrepreneurs are split on how to handle it. Without consensus, entrepreneurs, who have the most first-hand experience dealing with immigrant workers but only limited lobbying presence in Washington, will have little impact on the debate. Most likely, states and cities will take up the challenge, which could result in a patchwork of immigration regulations. And who will suffer from the loose ends? Guess.