Tight labor market in western suburbs: Impediments and solutions
The economies in the Western Suburbs are the envy of the rest of Illinois. Taking just one statistic, labor force participation rate, the state of Illinois' average is 65.2% while Kane County's is 69.2% and DuPage County's is 69.3%.
The downside to this good news is that the Western Suburbs face a tight labor market. Essential skills are in short supply. Moreover, the Western Suburbs are not immune from demographic trends that contract the labor market. Those who migrate away from the suburbs are often working-age residents, precisely the people we want to keep.
The federal government's immigration policies are not helping solve the labor challenge. President Trump issued his "Buy American and Hire American" executive order on April 18, 2017 and this has reduced the supply of human capital for employers. It is now harder to obtain skilled labor through the federal government's H1-B program. This is particularly true in the IT consulting industry. Since 2000, the U.S. Citizenship and Immigration Services employed a presumption that computer programmers were eligible for the H1-B program. This presumption was rescinded on March 31, 2017.
Meanwhile, since 2015, initial denial rates for H1-B visas increased from 4.3% in 2015 to 16.1% through the first three quarters of 2019. H1-B RFE (Request for Evidence) rates hovered around 20% for many years, yet they have nearly doubled to 40% in 2019. H1-B overall approval rates after an RFE were 83.2% in 2015 and to date, they are only 62.7%. Employers always knew that the H1-B process was costly and time-consuming. Now, it is costly, time-consuming and uncertain.
The federal government's increased attention to unauthorized workers further restricts the labor market. ICE is making its presence known by issuing subpoenas to manufacturers located in DuPage and Kane Counties and conducting I-9 audits. ICE wants to determine if these employers are compliant with their I-9 paperwork and whether they are employing unauthorized persons.
I-9 audits generally start with an administrative subpoena hand delivered to the employer. The subpoena will command the employer to produce original I-9 forms for every employee on the employer's payroll as of the date of the subpoena. The due date for the response can be short. Moreover, the subpoena will command the employer to list all of its staffing companies and provide copies of the employer's contracts with those staffing companies.
After an audit, the ICE has discretion to assess fines and penalties against an employer. Minor "paper" violations can range from $230.00 to $2,292.00 per form. If the audit reveals that an employer knowingly hired an unauthorized employee, the penalties can be much higher. Evidence suggests that it is creating a chill in suburban immigrant communities and keeping legitimate employees from applying to certain employers.
Hiring job applicants with criminal records is one way suburban employers are trying to overcome the labor shortage. Workers who would not have received a second look during the Great Recession are now being considered for hire by suburban employers.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire and retain ex-felons, among others. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit. The credit is available to employers who hire ex-felons, based on the individual's hours worked and wages earned in the first year.
Other employers are becoming more receptive to hiring older workers. Although it is illegal to discriminate against workers over 40 years old, age discrimination is still a hurdle for older workers to overcome. Americans 55 and older are less than 25% of the nation's labor force, but they filled 49 percent of the 2.9 million jobs gained in 2018.
• Ross Molho specializes in business counseling and employment law at Clingen Callow & McLean LLC, a full-service law firm of business advisers and counselors with offices in Geneva and Lisle.