ACA Gives Employers Even More Incentives to Hire Alien Workers

1/8/2015
By David North

One of the unanticipated by-products of the Affordable Care Act (Obamacare) is that it gives yet another set of financial incentives to many employers to hire alien workers rather than citizens or green card holders.

There are already plenty of existing tax incentives to employers to not hire American workers.

But under ACA it gets worse. For all classes of alien workers, even illegal aliens, it can be less expensive for an employer to hire a foreign worker than a domestic one. This relates to the unfortunate manner (in my eyes) in which the ACA is funded by tying support of the program to employment rather than to the overall tax base. (Unlike some of my colleagues here at CIS, I favor widespread, government-managed medical insurance, as is provided in Canada.)

The new law demands that employers of 50 or more workers provide medical insurance to them, but there are exceptions. It is not generally realized that employers do not have to provide this insurance to all workers — only to citizens and green card holders.

So hiring either a legal nonimmigrant worker or an illegal alien — rather than a citizen or a permanent resident — means that the employer can save thousands of dollars a year for each unmarried worker, and even more for those with families.

 The cost of such insurance is, in varying ways, shared between the worker and the employer, with the totals running around $6,000 a year for a single worker and $17,000 for one with a family.

Those numbers come from my CIS colleague, James R. Edwards, Jr., who has written about other problems with Obamacare recently.

As Edwards points out, hiring alien workers can play a different cost-cutting role for middle-sized employers: If they hire aliens rather than citizens or green card holders to the extent that the number of ACA-eligible workers on the payroll falls below 50, then employers do not have to provide any health benefits to anyone.

Those are the new developments. In addition, as we showed in some detail a couple of years ago, there are several classes of legal nonimmigrant workers who can be hired without the need to pay the usual payroll taxes. Thus, an employer is given a bonus from Uncle Sam for hiring aliens. In one of the programs, called Optional Practical Training and dealing with recent alien alumni of U.S. colleges and universities, an employer can secure a benefit of as much as $10,000 for hiring an alien rather than a citizen for a high-tech job.

In these instances the employer of the alien is freed from paying:

• FICA (Social Security) taxes at 6.2 percent of payroll;
• Medicare taxes at 1.45 percent of payroll; and
• FUTA (Federal Unemployment Tax Act) at $42 per year

So why pay more to hire a citizen or green card holder?

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Government-Created Financial Incentives to Hire Alien Workers Rather than Domestic Ones
(Arrayed, roughly, from larger to smaller populations)

Category of Alien Worker and, in Some Cases, Visa Class	Payroll Tax Break? (FICA, Medicare, and FUTA)	Obamacare Coverage Breaks?
Illegal aliens, generally	No	Yes
Temporarily legalized young illegal aliens, DACA	No	Yes
Long-term, temporary skilled workers, (H-1B)	No	Yes
Temporary unskilled, non-ag workers, (H-2B)	No	Yes
Temporary farm workers, (H-2A)	Yes	Yes
Summertime foreign workers, SWT, (J-1)	Yes	Yes
Recent alien college grads defined as college students by DHS, OPT (F-1)	Yes, for either 12 or 29 months	Yes
Alien college students working off-campus during the school year or during summers, CPT (F-1)	Yes	Yes
Alien students among exchange visitors, (J-1)	Yes for up to five years	Yes
Various, usually professional, workers among exchange visitors, (J-1)	Yes, for up to two years	Yes
Cultural exchange ("Disney") workers, (Q-1)	Yes	Yes

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Source: Center for Immigration Studies, Washington, D.C.

Abbreviations used include: DACA (Delayed Action for Childhood Arrivals); SWT (Summer Work/Travel); DHS (Department of Homeland Security); OPT (Optional Practical Training); and CPT (Curricular Practical Training).

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