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'Counting on Immigration,' Part 3

National studies show that undocumented immigrants make up 5 to 8 percent of the country's workforce. In Massachusetts, illegal workers play a growing role in the state's construction industry, because employers and consumers have become hooked on cheap labor.

In Part Three of our series, "Counting on Immigration," WBUR's Bianca Vazquez Toness reports on how the use of undocumented workers affects state revenue, competition among companies, and workers' wages.

Audio for this story will be available on WBUR's web site later today.

TEXT OF STORYBIANCA VAZQUEZ TONESS:
Here at this upscale development in Eastern Massachusetts, men are hard at work, building half-million-dollar homes. I spoke to more than a dozen workers at this site and many are from Ecuador, Honduras and Brazil.

They say they don't have legal permission to work or live in this country, but they are framing, roofing, putting up drywall and siding on these fancy homes. Illegal immigrants like these men have played a big part in the recent housing boom in Massachusetts.

According to a study by the Pew Hispanic Center, one in five construction workers in the U.S. is from Latin America. And newly arrived immigrants have taken a third of the country's new construction jobs in the last three years. They are more likely to be undocumented since it's been difficult to get into the country legally.

And when you ask these men, it's clear why they're getting these jobs. They'll work for less.

(LAUGHTER)

Jose is an immigrant from Brazil. He doesn't want us to use his full name since he's undocumented. He just laughs when I ask him about his wage and benefits.

JOSE: IN PORTUGUESE....
ENGLISH TRANSLATION: I know that this work should earn $40 an hour, at least $30 an hour. But as Brazilians, we're worth less.

TONESS: Jose has spent the last three and a half years installing windows and decks in this housing development. He says he never once earned overtime for his 50-hour work weeks.

I met carpenters here who make as little as $13 an hour, that's less than half the prevailing wage, and a fifth of the total package a union carpenter would make.
The willingness of undocumented immigrants to work for less and off the books has fueled what Bear Stearns Assets Manager Bob Justich calls our "addiction to cheap labor." He wrote a report warning investors about the "steroid-enhanced effects" of cheap labor on productivity and keeping inflation down.

BOB JUSTICH: If a competitor is using undocumented workers at a lower cost, meaning cash, sometimes off the books, no benefits, it is very hard to compete against that. And other businesses are forced to follow the same suit .

TONESS: The pressure to keep labor costs down benefits consumers and businesses, but there is a price.

DANA ANSEL: The underground economy hurts everyone in the state.

TONESS: Dana Ansel is a policy analyst for MASSINC, a non-partisan, Boston-based think tank.

She says Massachusetts loses money when companies cut corners. They avoid taxes by paying their employees in cash and leave it to them to pay for workers comp, health and unemployment insurance.

ANSEL: The employers within the underground economy, they gain all all the benefits of the state, they gain the infrastructure, they gain the roads, they gain the justice system, they gain all the things that come from the investments that all of us in the state put in, yet they're not helping to pay for it.

TONESS: A 2004 Harvard University study showed that in Massachusetts one in seven construction workers — or their employers — failed to pay taxes. That costs the state about $20 million a year in lost tax revenue.

Labor expert Francoise Carre conducted the study. She says when building companies use the underground economy to keep costs low for new-home buyers, residents lose more than just tax revenues.

FRANCOISE CARRE: So the person who's getting to build their house that way is saving on their costs, however, when this gets to be a more generalized pattern in construction you end up having a group of workers in the society who when they get injured end up in the emergency room, or when they get sick end up in the uncompensated care pool.

And those are costs that are hidden, and costs that are socialized. We all pay for that, and not that individual contractor or that individual homeowner who benefited.

TONESS: And the way the construction business works, with one subcontractor working for another who works for another, there's often no direct connection between laborers and the firm ultimately responsible for the job.

Carre says this system enables both companies and undocumented workers to skirt the law.

CARRE: Some of these subcontractors routinely do business for a layer up of contractors who are fuzzily aware of the fact that they haven't asked any questions about how these workers are being paid that are on their building and on their site.

When we did this study in Massachusetts what we showed was that when employers missclassify, they do it a lot. Meaning that they break the law systematically. And those operators can easily be found on large sites where there are lots of above-board contractors working as well.

TONESS: It even happens on sites with seemingly strict labor regulations.

(sound of construction)

SUBCONTRACTOR: We're operating in a legitimate world, much more legitimate than how the underground economy operates.

TONESS: This woman owns a construction company outside of Boston. We're not naming her or the project to protect the employees on this public works construction site. She is one of about a dozen subcontractors working on this building project in eastern Massachusetts.

SUBCONTRACTOR: Workers on this job are all union, this generally means they're making a wage between $20 and $30 an hour, they're getting a package which includes annuity, pension, health care. In addition to that, they're getting paid into state unemployment taxes.

TONESS: She says she doesn't compete with companies that use cheaper unregulated labor since she primarily works on public buildings.

She goes to great lengths to play by the rules, and expects the other subcontractors on the site to be subject to the same tough scrutiny. Public works projects require everyone to earn the prevailing wage.

That's a state law that ensures workers doing the same job will make the same salary.

But one of her men working on this site says there's one subcontractor here who isn't doing things the right way. He points to four men applying stucco and standing on man-lifts.

TONESS: Do you know they're undocumented?

UNION MEMBER: Yes.

TONESS: How do you know?

UNION MEMBER: They're all out of state, they're not my members. That's how I know. They're underpaid, that's why they're on the job.

TONESS: He says the men are depriving union members of jobs.

Do you have a lot of friends who are out of work?

UNION MEMBER: Yes, we've got men on the bench right now because of people like them. Which is terrible.TONESS: The week after I spoke to this union member, I returned to the site to check on the status of the workers he identified.

The five workers in question are from Bolivia, and came here to Massachusetts with an out-of-state subcontractor to specifically work on this job. Two men, who spoke to me in private, admitted they are undocumented immigrants, and asked me not to use their names for fear of getting fired or deported. Payroll documents obtained by WBUR show these men do seem to be underpaid.
Here's how it works.

The subcontractor has classified them as assistants. The official term in the building trades is "tender." According to agreements between builders and laborers, tenders can only mix and deliver materials to journeymen, those journeymen are the only ones who can apply the materials.
But there are no journeymen on the payroll, and I observed these five men do the work of journeymen. Classifying the men as assistants saves the company almost $20 per worker per hour.

A lawyer representing the subcontractor says the company has very strict policies on only employing those authorized for work. He says the employees all have I-9s, the forms new employees fill out verifying they are permitted to work in the U.S. He said the company has not verified the workers' social security numbers with government databases. Indeed, the federal government does not require companies to validate social security numbers.
Massachusetts labor secretary Suzanne Bump didn't seem surprised that there were undocumented workers on a public construction site and that they and their coworkers may be underpaid.

SUZANNE BUMP: Frankly the problem is on such a wide scale right now that there is not sufficient state staff in order to provide the level of surveillance that we would like to be able to do.

TONESS: Bump certainly recognizes that the underground economy has taken root in the construction business in Massachusetts. But she says too often her office has to depend on labor unions to report violations rather than state inspectors.

BUMP: So many jobs are service-related, they are not being performed in factories where regular enforcement can be had. This is a growing problem that deprives the state of tax revenues and exploits workers.

TONESS: Back at the public works site, one of the undocumented workers I had spoken to didn't know he should be paid almost $20 more per hour for the type of work he's doing. He asked me what rights he has as an immigrant — if any — if he's not paid as he should be.Our series, "Counting on Immigration," was produced by WBUR's Anna Bensted and George Hicks. WBUR's Jesse Costa and Angel Kozeli created and collaborated on our special web site for the series. You can connect to that on the link below.

This program aired on November 14, 2007. The audio for this program is not available.

Bianca Vázquez Toness Twitter Reporter
Bianca Vázquez Toness was formerly a report for WBUR.

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