Focus

It's long been accepted that roofing contractors increasingly are dependent on immigrant labor to fulfill their work force needs. But the problem many contractors—in all industries—are facing is an insurgency of undocumented immigrants setting up shop and underbidding legitimate businesses.

According to Fortune Small Business magazine, this so-called "underground economy" is generating revenues of up to $1 trillion per year primarily because illegitimate businesses enjoy freedom from taxes and government regulations.

This is causing significant issues in states, such as California, that are heavily populated with undocumented workers. California businesses are starting to find it difficult to compete—many of their customers don't care whether a contractor pays his workers' compensation premiums, for example; all they want is the cheapest price.

The problem is so bad in California the state's Labor and Workforce Development Agency has set up a 61-person task force to root out cash-only businesses and investigate workers' compensation claims against previously unknown employers.

The federal government is losing out to the underground economy, too. The Internal Revenue Service (IRS) estimates an annual shortfall of $400 billion in unpaid federal taxes thanks mainly to off-the-books transactions. President Bush has addressed the problem by asking Congress to approve $500 million to the IRS' enforcement division.

In addition, Bush pragmatically wants to extend legal temporary-worker status to illegal immigrants to as long as six years rather than curb the flow of immigrants (most of whom come from Mexico and Central America). The theory is undocumented immigrants would welcome the opportunity to work legally in the U.S.

Although anti-immigration groups oppose Bush's policy, curbing illegal immigration has become more difficult with the Department of Homeland Security focusing on terrorism. Arrests of employers who hire illegal workers have dropped from 18,000 in 1997 to 1,000 in 2002, says Fortune Small Business. The federal government estimates there are 9 million illegal immigrants in the U.S.—far less than the 20 million estimated by investment banking firm Bear Stearns, New York.

The Catch 22 with immigration isn't likely to be resolved soon. Until then, make sure you explain to customers the im-portance of hiring legitimate contractors who can provide proof of insurance, licensing, etc. NRCA offers contractor qualification forms you can give to clients on www.nrca.net.

Ambika Puniani Bailey is editor of Professional Roofing magazine and NRCA's director of communications.